Determine the Business’ Legal Structure

Whenever you start a business, you already knew that you’re not just going to sit and laze on your chair while the company grows around you. It takes knowledge, practice, and the tools of the trade to understand anything and everything there is to make sure your company doesn’t get on the bad side of the law.

Understanding local, state, and federal laws in keeping and managing a business are essential practices for any business owner, no matter what the size of the company. As a business owner, you need to play different roles to keep your firm functioning properly and smoothly. Among the many roles you play, one of those might not be a lawyer. Since laws are constantly changing, you already have too much on your hands and mind to even care for additional knowledge. A good attorney can help you understand ins-and-outs of running the legal end of the business, but it doesn’t mean that you shouldn’t have at least some knowledge about these laws.

Legally Structuring Your Business

When structuring your business, It’s important to know about the paths you can take. Any business venture can be structured in different ways. However, the general rule of law dictates that businesses fall under three legal forms, them being a sole proprietorship, general partnership, and corporation.

Sole Proprietorship 

The most straightforward business structure out of the three possible choices is a sole proprietorship. It also has the least amount of required paperwork, but it also requires plenty of determination and perhaps even an endless supply of energy. You’re not even required to perform any formal action if you wish to set up a business under the sole proprietorship structure. Most freelancers would go this route because they don’t need to hire a workforce or other professionals to keep the business afloat. Reports even indicate that there are nearly three-quarters of all legit businesses are found to be under this structure.

General Partnership 

Businesses under the structure of general partnership will be an association of two or more individuals that carry the company as co-owners for profit. Some business owners might want to seek the aid of a partner to fill in for the skills they may lack. However, it’s always vital to choose a suitable partner for the job. Never select any random person that’ll offer a quick investment to your company. Think about it as getting into marriage because of all the commitments you’re going to make so that the relationship lasts.


A corporation is considered as the most complex and formalized form of business organization out of all the choices in structuring your company. It requires more paperwork, it’s more difficult to manage, and you’re going to spend a lot more than setting up a firm under a sole proprietorship or general partnership. Nonetheless, a corporation will divide the business’ shares into stocks. Hence, if one owner of the company dies or decides to go out of the agreement, then the business can still stand with or without their presence because of other major shareholders.

These may all sound confusing and highly complex, especially if this is your first time to build a business. If you’re having difficulties in understanding some, most, or all things related to the legal structure of your soon-to-be business, then feel free to check out