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Guide To Choosing Legal Entity For Startup

Guide To Choosing Legal Entity For Startup

Choosing the right legal entity is the first important legal decision one has to make to make sure that your startup is one the right track. Finding the right legal decision falls on many factors which a good legal entity can help advice you on. Here are some important things one needs to keep in mind to know which advice can help you business.

Sole Proprietorship

This is one of the most easiest and the most common way to make sure that you have the right advisor. Starting a small business of sole proprietorship does not need a lot of formal filling which is one of the most simplest way to help you business. The business owner is personally responsible for all the debts which occur in the business. Some benefits that you legal entity to advice you are the advantages:

  • Easy to form as all you have to do is get a license to make sure that nobody is taking your idea.
  • It makes the tax preparation easy as you do not have to file a separate tax return.
  • As you business owner on of the biggest drawback is the fact that it is you is going to held responsible.



A general partnership will make sure that all are responsible for all the profits and the liabilities who has equal partnership which allows you to make the money and also find the liability and limited shares which can help you profit by owning a percentage. Some benefits that a partnership deal gets you is as following:

  • Having a partnership license is also easy to obtain.
  • Partners generally share the financial responsibility of your partnership. There are many challenges that come with running with a small business.
  • There are many people who are ready to help you whenever there is any problem.
  • There is also a shared liability that you and your partners are equally responsible for.
  • Taxes can be complicated but requires you have to report the additional reporting is maintained.


Corporation is a separate entity where the while entity is owned by shareholders than any individual. It is the corporation that is responsible for the debt and liabilities of the business. It is more complicated than a business entity which will likely require you to fill a form and make more sophisticated tax and legal requirements.

  • One of the biggest advantage that comes with a corporation is the fact that shareholders are not personally liable for the action of the corporation.
  • Corporation file taxes can work separately from the shareholders which can work on salaries and bonuses.
  • It can easily generate capital by selling shares to the investors and are more likely to find success.