Choosing the Right Business Structure for Your Small Business

Post #12: Sole Proprietorship, Partnership, LLC, S-Corp, or C-Corp?

In this Substack, I will walk you through the process of starting, operating, maintaining, and — if needed — selling or closing your own small business.

Today, I am going to help you choose the right structure for your new business to optimize taxes, protect your personal assets, align with your growth goals, and navigate the complexities of funding and compliance.

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👉 Subscribe to this Substack if you want to learn how to setup, operate, maintain, scale, etc… a small business. The Journey began with Post #1.

To review:

• You decided on what service or product you want to offer, and realized why you chose this one, and you made a list of ideas for potential business names [Posts 1 & 2].

• You searched for your business name ideas via web search, the Secretary of State business entity search, the US Patent and Trademark Office TESS (online search tool), DNS (for website domains), online map apps for brick and mortar business names, social media for existing handles, and WIPO’s Global Brand Database to ensure that your name has not already been claimed [Posts 3–10].

• You conducted a variety of tests to make sure that your new business name would stand out to potential customers and not cause confusion [Post #11].

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Choosing a Structure for Your Business

Selecting the right business structure when you are just getting started is an important decision (and the next logical step in the Journey).

The choice you make will affect everything from taxes and legal liability to daily operations and growth potential.

For example, if you want to keep things simple and maintain a “side gig” for beer money, you can certainly do so and not have to spend as much time and effort on paperwork.

Photo by Andrew Patrick Photo

Alternatively, if you are rolling up your sleeves and building a private technology consulting firm or an HVAC repair service company, you will most likely need a Limited Liability Company (a.k.a.: LLC) or a Corporation to handle a more complex professional service-oriented business.

💡 Tip: Before you over-commit and sign up for a lot of operational headaches with no revenue, start small!

You can begin as a Sole Proprietorship and ‘upgrade’ your business later, after you start making some consistent revenue. Once you can afford to quit your day job and hire a part-time assistant, full-time employees, or subcontractors, then it makes more sense to scale up.

You are not ‘stuck’ with your initial choice, and there are relatively easy ways to make changes to your business structure with standard forms from the state, IRS, and other government entities (which I will cover in a future article).

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Primary Business Structures: Overview, Pros, and Cons

Let’s go through the most common types of business structures, starting with the most simple type.