One of the most important choices you’ll make when starting a business is the type of legal structure you’d like for your company. You need to choose from the different types of business ownership. This decision affects multiple aspects of your business culture, growth, and direction including personal liability and tax requirements.

If you’re just starting out and haven’t had experience in business start-ups, it’s important to seek advice from startup business experts and state counsel as each situation is different and the implications shouldn’t be taken lightly. There are three main types of business ownership that vary vastly in terms of liability, tax implications, and bookkeeping requirements:

1. Sole Proprietorship

The simplest type of business to operate, the sole proprietorship indicates the sole individual in charge of running the business and does not differ between owner and entity. This means that the individual is solely responsible for any debts related to the business. While it’s easy to control and simple to maintain, the owner is also personally liable for any and all financial obligations.

2. Limited Liability Corporation (LLC)

Similar to a sole proprietorship, a Limited Liability Corporation or LLC allows the owner to maintain sole control over the business. However, it differs in that the owners are not personally responsible for any debts or liability incurred by the business. While the profits and losses are transferred without taxation, it operates without liability.

3. S-Corp

The single most important benefit from S-Corp status is that there is no personal liability as the corporation becomes a completely separate entity from the owner. The disadvantage of setting up an S-Corp involves the initial cost to form a corporation and the extensive business bookkeeping involved to maintain accurate and timely records.

We love to work with businesses of all types and sizes! If you’re needing additional help with your monthly bookkeeping tasks, please reach out to us for a free bookkeeping consultation! We’re happy to help ease the burden and free up your time to focus on your business!