Starting a Business – Business Structure & Incorporation

When organizing your business, depending on your circumstances, you might choose one of the following structures for your business:

  • sole proprietorship
  • partnership
  • limited partnership
  • limited liability company (LLC)
  • corporation
  • nonprofit organization
  • cooperative

Many new businesses are sole proprietorships or partnerships, whether by choice or not. A business that has just one owner may be a sole proprietorship, whether the owner has decided to run it that way or not. If you do not choose a business structure, do not file any paperwork, and just start running your new business alone, most likely your new business will be treated as a sole proprietorship under the law. If your business has two or more owners — and you have not chosen a business structure or filed any paperwork, and have just started running the new business with the other owners – most likely your new business will be treated as a partnership under the law. Sole proprietorships and partnerships can have significant tax, liability, and other unplanned consequences.

If you would like to limit your personal responsibility, you might consider setting up your business as a limited liability company (LLC) or a corporation. A nonprofit corporation might work for you if your business is being formed to carry out an educational, charitable, scientific, literary, or religious purpose. If you are interested in starting a business that is owned and operated for the benefit of those who use its services, a cooperative may be the best choice for you.

Legal Editor: Dan Brecher, November 2014 (updated February, 2016)

Changes may occur in this area of law. The information provided is brought to you as a public service with the help and assistance of volunteer legal editors, and is intended to help you better understand the law in general. It is not intended to be legal advice regarding your particular problem or to substitute for the advice of a lawyer.

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