For New Jersey business owners who are just starting out, choosing a business structure can be a difficult decision. Each type of business structure has its pros and cons, so it may be beneficial to speak with a small business law attorney to help determine which structure is best for you.

What are the main types of business structures?

There are a few business structures for business owners to choose from. Most businesses in the United States have one of the following structures:

  • Sole proprietorship
  • Partnership (general or limited liability)
  • Limited Liability Company (LLC)
  • Corporation (S-corp or C-corp)

How do I choose which one is best for my business?

There are many things to consider when choosing a business structure. Some of the most important considerations are:

  • Liability – As a business owner, you may be held personally liable if your business gets sued, depending on what type of structure you choose. For example, owners of sole proprietorships and general partnerships are fully responsible for anything that goes wrong with the business. However, owners of LLCs and corporations are offered liability protections so that they are not held personally liable.
  • Income tax-You should also consider how your business will get taxed. For example, LLCs are taxed on the business profits and losses, which then ‘pass-through’ to owners on their own personal income taxes and the owners must pay taxes on all net business profits. However, corporations are separate tax entities, and will only pay taxes on certain profits.
  • Potential growth-If you plan on selling company stock, sole proprietorships and LLCs may not be right for you. C-corps, on the other hand, allow you to have as many shareholders as you want to.
  • Simplicity in the startup- Generally, starting an LLC and corporation requires more work and money than starting a sole proprietorship or general partnership.

Deciding which business structure is best for your business can be difficult, but an attorney in your area can help you make that important decision.