Topic 01 of 6
Business Structure
Choosing Your Entity
One of the first — and most consequential — decisions a business owner makes. The legal structure you choose affects your personal liability, how you are taxed, your ability to raise investment, and how the business is transferred or closed. There is no universally right answer. The right choice depends on your situation.
Signposting tool only — not legal advice. This page explains what this area involves and points you to official government sources. It does not assess your situation or tell you what to do. Consult a licensed attorney for your specific circumstances.
Option B — Awareness Checklist
Things to be aware of in this area
This is not a compliance checklist. These items flag areas worth exploring — they are not a substitute for professional legal review. Ticking all boxes does not mean you are compliant.
I understand the difference between a sole proprietorship, LLC, partnership, and corporation
I know whether my business structure protects my personal assets from business debts
I am aware that my structure affects how business income is taxed (pass-through vs corporate)
I know my state's requirements for forming and maintaining my chosen entity type
I have checked what annual filing or reporting requirements apply to my structure
I understand that changing structure later is possible but can have tax and legal implications
I know that a verbal partnership is still legally a partnership in most states
I am aware that a single-member LLC may not provide liability protection in every state without proper maintenance
I have considered whether my structure is appropriate if I plan to bring on partners or investors
I know where to get official guidance on entity formation for my state
Official Resources
Where to get authoritative information
🤝
SCORE — Free Business Mentoring
Free one-to-one mentoring from experienced business professionals. Can help you think through structure decisions before engaging a lawyer.
https://www.score.org/find-mentor →⚖️
Your State Secretary of State
Entity formation is filed at the state level. Search "[your state] Secretary of State business registration" for the official filing portal.
https://www.usa.gov/state-business →
FAQ
Do I need an LLC or is a sole proprietorship fine?
A sole proprietorship is the default — no filing needed, but no separation between your personal and business assets. An LLC creates a legal separation that may protect personal assets if the business is sued. However, this protection is not automatic — you must maintain the LLC properly (separate accounts, annual filings, not mixing personal and business funds). This is a decision worth discussing with a licensed attorney and an accountant, as it has both legal and tax implications.
FAQ
Can I just use my own name and trade informally?
Yes — operating as a sole proprietor under your own name requires no registration in most states. If you use a different business name (a "DBA" or "doing business as"), most states require you to register that name. Operating without registering when required can affect your ability to open a business bank account, sign contracts in the business name, or enforce agreements. Check your specific state rules via your Secretary of State office.
FAQ
What happens if my business structure is wrong when I get sued?
If you operate as a sole proprietor and are sued for a business debt or judgment, your personal assets — home, savings, car — can be at risk. An LLC or corporation can limit this exposure, but only if properly formed and maintained. Courts can "pierce the corporate veil" and hold owners personally liable if the entity was not kept separate from personal finances. An attorney familiar with your state's laws can advise on the right structure and how to maintain it.