The Most Common Types of Business Organizations

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The Most Common Types of Business Organizations

If you are a business owner or entrepreneur and you are trying to determine the best way to structure your organization from a legal standpoint, there are a few options for you. It pays to consider each option and do your research before making any final decisions. Each option has its own advantages and disadvantages that can have big ramifications for the future. Choosing one that makes you responsible for all of the liabilities that come with owning a business is something you need to be very sure of before proceeding.

Hiring a great business lawyer is always a fantastic idea if you have any doubts or would like some clarification on which business entity is best for your own needs. Business law can be confusing for those who don’t have prior experience. Let’s look at the most common types of business organizations below.

Sole Proprietorships

A sole proprietorship essentially means that you are the sole owner of the business. You are handling all of the major business decisions and getting all of the profits. On the other hand, if someone sues your business, all of the liability is going to fall on you. You could lose your assets if someone does sue you. It’s always a good idea to invest heavily in business insurance if you decide to go with a sole proprietorship.


Another common way to organize a business from a legal standpoint is forming a partnership. This is an option that offers extensive protection for liability and more freedom. However, you will have another person, known as a partner, involved in the business. If they decide they want to walk away from the business, the partnership will be dissolved. You can choose a general partnership or a limited liability partnership depending on your own personal preferences.

Limited Liability Corporations (LLCs)

This is a common option for those who want to avoid lots of personal liability. It’s fairly easy to form a Limited Liability Corporation. This option is a combination of a partnership and a corporation that has all of the profits pass through to the owners. It’s also important to note that the owners are responsible for the taxes of the business. If you have any questions about LLCs or if they are a good option for you, it’s a great idea to contact a business law professional.


Forming a corporation can be an expensive and long process. After a corporation has been formed, it is considered a completely separate entity from its owners. It will have legal responsibilities and rights. The good thing about a corporation is that the owners cannot be sued for more than their initial investment in the company. On the other hands, corporations have very regimented structures and are typically double taxed.

We hope this basic overview of the most common ways to organize a business legally has provided you with some valuable insight. Remember to reach out to a business lawyer if you have any questions.