New York SBDC Research Network

Written by Marco Carbajo  Article from Blogs. Industry Word Choosing which business structure is right for you is a crucial step when starting a business. The entity you select has legal, financial, and operational implications. Here are three factors to consider when choosing a business structure.  Business Taxes – Business owners must meet all federal, state, and local tax obligations to stay in good legal standing. The type of business structure you choose impacts your personal liability and which taxes your business must pay.  For example, choosing a sole proprietorship may be the easiest structure to form for a small business startup, but it comes at a price. A sole proprietorship has less government regulations and tax obligations than all the other business structures. It’s taxed at the personal level because you and your business are considered the same legal entity. This means you are personally responsible for all the business’ losses and liabilities. ...

If you’re starting a business, you may be wondering how to legally structure it. Should you incorporate, become an LLC, or operate as a sole proprietor? Over 70 percent of U.S. businesses are owned and operated by sole proprietors or sole traders. But what does being a sole proprietor involve and is it the right structure for your small business? Here’s what you need to know about the advantages and disadvantages of being a sole proprietor. More from SBA

To incorporate, or to not incorporate? That is the question posed at start-up. This Advocacy funded report by Rebel Cole, How Do Firms Choose Legal Form of Organization? (PDF) finds that the choice of legal form of organization is relatively stable over a firm’s first four years. When changes do occur, they tend to be to the more complex forms of organization. A Research Summary can be found at here (PDF) .