Everything You Need To Know About The Best Legal Structure For Your Business

Best Legal Structure For Your Business

Choosing the right legal structure for your business is the very first step to establish your business. Whether you are just starting or your business has started to spread its wings, investing in the right legal structure will help you in many ways.

The legal structure of your business starts with analyzing your company’s goals and integrating them with the business law. By clearly defining your goal, you can pick the right legal structure for your business. Legal structures are flexible, and as your business grows, you can make the necessary modifications.

Types Of Business Legal Structure-

Before you can start implementing a legal structure in your business, you must understand what each legal structure can and how it can benefit your business. Given below are a few business structures that most of the businesses follow.

Sole Proprietorship:

This is the most common type of legal structure where a single person is responsible for all of the company’s profit and debt. The cost of proprietors varies depending on the type of industry your business belongs to.

With the sole proprietorship, you get the advantage of:

  • Easy setup.
  • Low cost.
  • Tax deduction.
  • Easy exit.


This type of legal structure mostly comprises two or more individuals responsible for the business. The partnership legal structures are divided into two parts:

General partnership: In a general partnership, all the partners hole the same percentage of shares and share equal responsibility.

Limited partnership: A limited partner has the main owner who controls the whole business, and others just invest in the business and enjoy the profits.

Advantages of Partnership legal structure.

  • Easy to form.
  • High growth potential.
  • Special taxation.

Limited Liability Company (LLC):

A limited liability company is a hybrid of the owner, partners, and shareholders. It allows a restriction on personal liabilities while offering tax benefits and flexibility of a partnership.

The cost of filing for LLC comprises state filing fees. The fee can range from $50 to $500, depending on the filling state.


The corporation is different from all the legal structures. The law states that a corporation is a separate entity from its owners and has legal rights. A corporation has the functionality to sue, get sued, and sell them the right of ownership in stocks.

Advantages of Corporation legal structure.

  • Limited liability.
  • Continuity
  • Capital


A cooperative legal structure is owned by the same people it serves. Cooperative legal structure offerings benefit the members of the company who support the organization’s missions and share profits.

Advantage of Cooperative.

  • Lower taxes.
  • Increased funding.
  • Discounts & Better services.

Factors To Consider Before Choosing A Legal Structure For Your Business-

For the new businesses, the legal structure can fall into two or more categories; it can get confusing to choose the right legal structure for the business. If you are in such a situation, you need to consider your business needs.

Here are some important factors that you can look into to better understand which legal structure moist complements your business.

  • Complexity: When it comes down to startups, see how complex your business is – Whether you are the sole member or have partners to work with.
  • Flexibility: Reviewing the business goals will give you an idea of where your business is headed to. By knowing the future growth, you can easily determine a legal structure for your business.
  • Taxes: You must go through all the legal strictures and see which can save more taxes for your business.
  • Capital Investment: Capital investment plays an important role in determining the legal structure of your business. For instance, if you are the main investors for your business and your friends are just paying enough to be considered shareholders, the Corporation’s legal structure might suit your business the best.
  • License & Regulation: In addition to the legal registration of your business, many business ventures require a license and permit. This can also play an important factor in choosing the right legal structure for your business.

Take Away:

There you have it; now you know what legal structure you can follow for your businesses. The legal structures we have discussed here are only for-profit businesses. We hope you found this article helpful and could get the answers you were looking for. To know more about legal structures, you can contact Chicago Business Lawyer.

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