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What Are the Different Business Ownership Structures?

What Are the Different Business Ownership Structures?

Starting a business is the greatest accomplishment in many individuals’ lives. It is the moment when all of their hard work, dedication, and passion come together to create something amazing. However, with new accomplishments come new challenges. It is important that business owners understand which type of structure is best for them if they wish to succeed. If you are considering starting your own business, here are the different types of ownership structures you can choose from.

Sole Proprietorship

This is any business owned by one person. It is not registered with the state and does not require any special papers to set up.

In the eyes of the law, the sole proprietorship and its owner are inseparable. This means that any income or losses are all reported under the owner’s personal tax returns, and they are responsible for any debts or legal actions facing the business.


A partnership is very similar to a sole proprietorship; however, it involves two or more people owning the business. The agreement begins as soon as you go into business with your partner. The partners share responsibility for taxes, debts, and legal cases involving the business.

Limited Partnership

A limited partnership is made of two types of partners: the general partners and the limited partners. The general partners then seek investments from limited partners to create the business. The general partners manage the business and are fully responsible for the business debts. A limited partner on the other hand is only partially in control of how the business is run, but is not liable for the business debts.

Limited partnerships are complex in nature. You need an experienced business litigation attorney to help form a limited partnership.


Unlike other business structures, a corporation is its own legal entity, separate from its owners, investors or managers. A corporation has its own taxes and is seen as a legal “person” in the sense that it can enter into contracts, accumulate debuts and be liable for any illegal activities. Also, unlike other structures, it does not dissolve when ownership changes.

Again, this is a complex structure meant for larger businesses.

Limited Liability Company

In an LLC, the owners are known as members. Depending on the business, there can either be a single member, or multiple individuals owning the business.

A limited liability company is a hybrid of both sole proprietorship and a corporation. Like a corporation, the LLC is protected from any debts or claims. For this reason, limited liability corporations are a popular choice among business owners.

Contact Khonsari Law Group for Legal Counsel

If you are starting your own business, consult with the Khonsari Law Group. We can help you decide which structure will work best with your business, and assist with your business entity formation. Give us a call or reach out online.

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