Business structure decisions confuse founders. LLC. Corporation. Partnership. The terms sound legal. They feel complicated.
Most founders guess. They pick randomly. They make mistakes.
Business structures are simpler than they seem. Each structure has clear benefits. Each has clear tradeoffs.
This guide explains LLC, Corporation, and Partnership in plain English.
Key Takeaways
- Understand LLC—learn limited liability company basics
- Understand Corporation—learn corporation basics
- Understand Partnership—learn partnership basics
- Compare structures—see differences clearly
- Choose structure—make informed decision
Table of Contents
Structure Basics
Business structures define your business. They determine liability. They affect taxes. They shape operations.
Liability protection: Some structures protect personal assets. Others don’t. Protection matters.
Tax treatment: Structures are taxed differently. Some pass through. Others pay corporate tax.
Operations: Structures have different requirements. Some are simple. Others are complex.
Why this matters: Structure choice affects everything. If you understand structures, choices improve.
LLC Explained
LLC means Limited Liability Company. It’s popular. It’s flexible.
What LLC Means
LLC provides:
- Limited liability protection
- Pass-through taxation
- Flexible management
- Simple operations
Why this matters: LLC offers protection and simplicity. If you understand LLC, you see benefits.
LLC Benefits
LLC benefits include:
- Personal asset protection
- Tax flexibility
- Simple formation
- Minimal compliance
Why this matters: LLC benefits make it attractive. If you understand benefits, appeal becomes clear.
LLC Drawbacks
LLC drawbacks include:
- Self-employment taxes
- Limited growth options
- State fees vary
- Less credibility than corporation
Why this matters: LLC drawbacks show tradeoffs. If you understand drawbacks, tradeoffs become clear.
Pro tip: Use our TAM Calculator to evaluate market opportunity and inform business structure decisions. Calculate market size to understand growth potential.
Corporation Explained
Corporation is formal. It’s structured. It’s traditional.
What Corporation Means
Corporation provides:
- Strong liability protection
- Corporate tax treatment
- Formal structure
- Growth potential
Why this matters: Corporation offers protection and growth. If you understand corporation, you see benefits.
Corporation Benefits
Corporation benefits include:
- Strongest liability protection
- Ability to raise capital
- Credibility with investors
- Employee stock options
Why this matters: Corporation benefits enable growth. If you understand benefits, growth becomes possible.
Corporation Drawbacks
Corporation drawbacks include:
- Double taxation
- Complex compliance
- Higher costs
- More formal requirements
Why this matters: Corporation drawbacks show tradeoffs. If you understand drawbacks, tradeoffs become clear.
Partnership Explained
Partnership is simple. It’s informal. It’s collaborative.
What Partnership Means
Partnership provides:
- Shared ownership
- Pass-through taxation
- Simple formation
- Flexible operations
Why this matters: Partnership offers simplicity. If you understand partnership, you see benefits.
Partnership Benefits
Partnership benefits include:
- Easy to form
- Shared responsibility
- Pass-through taxes
- Flexible structure
Why this matters: Partnership benefits make it simple. If you understand benefits, simplicity becomes clear.
Partnership Drawbacks
Partnership drawbacks include:
- No liability protection
- Personal asset risk
- Shared liability
- Potential conflicts
Why this matters: Partnership drawbacks show risks. If you understand drawbacks, risks become clear.
Structure Comparison
Compare structures side by side. See differences clearly.
Liability Comparison
Liability protection:
- LLC: Personal assets protected
- Corporation: Strongest protection
- Partnership: No protection
Why this matters: Liability comparison shows protection levels. If you compare liability, protection becomes clear.
Tax Comparison
Tax treatment:
- LLC: Pass-through or corporate
- Corporation: Corporate tax
- Partnership: Pass-through
Why this matters: Tax comparison shows tax differences. If you compare taxes, differences become clear.
Complexity Comparison
Operational complexity:
- LLC: Moderate
- Corporation: High
- Partnership: Low
Why this matters: Complexity comparison shows effort required. If you compare complexity, effort becomes clear.
Growth Comparison
Growth potential:
- LLC: Moderate
- Corporation: High
- Partnership: Low
Why this matters: Growth comparison shows potential. If you compare growth, potential becomes clear.
Pro tip: Use our TAM Calculator to evaluate market opportunity and inform business structure decisions. Calculate market size to understand growth potential.
Your Next Steps
Understanding business structures enables better decisions. Understand LLC, understand Corporation, understand Partnership, compare structures, then choose structure to make informed decision.
This Week:
- Begin understanding each structure using our TAM Calculator
- Start comparing structures for your situation
- Begin evaluating liability needs
- Start considering tax implications
This Month:
- Complete structure comparison
- Evaluate your specific needs
- Choose appropriate structure
- Begin formation process
Going Forward:
- Continuously evaluate structure fit
- Consider structure changes as you grow
- Maintain compliance with chosen structure
- Optimize structure for your situation
Need help? Check out our TAM Calculator for market evaluation, our structure selection guide for examples, our FAQ guide for answers, and our upgrade guide for transitions.
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Sources & Additional Information
This guide provides general information about business structures. Your specific situation may require different considerations.
For market size analysis, see our TAM Calculator.
Consult with professionals for advice specific to your situation.
