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  • Writer's pictureMargaret Asante

What type of business entity should I form?

Forming a business entity is a crucial step for any entrepreneur looking to start a new business. The type of business entity you choose has legal and tax implications, so it’s important to choose the one that best fits the needs of your company.

When selecting a business entity, the most common choices are a sole proprietorship, partnership, Limited Liability Company (LLC), and corporation. Each entity has different advantages and disadvantages, so it’s important to weigh the pros and cons before deciding which entity is right for you.

Sole Proprietorship

The first type of business entity to consider is a sole proprietorship. This is the simplest form of business structure and requires the least amount of paperwork. With a sole proprietorship, you are the sole owner and you have complete control over the business. However, the downside is that you have unlimited personal liability if anything goes wrong.


If you are looking to partner with someone else, a partnership may be the right choice. In this entity, you and your partner share ownership and control of the business. You can also choose to form a limited partnership or a limited liability partnership (LLP). With both of these, each partner has limited personal liability in case of any legal issues.

LLC (Limited Liability Company)

The third type of business entity to consider is a Limited Liability Company (LLC). This entity combines elements of a corporation and a partnership. With an LLC, you have the limited liability of a corporation and the flexibility of a partnership. This makes an LLC a popular choice for small business owners.


Finally, if you are looking for more structure and protection, a corporation may be the right choice. Corporations are subject to more regulations and paperwork than other entities, but they also offer the most protection for their owners. With a corporation, the owners’ personal assets are protected from legal action and creditors.


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