A Checklist for Selecting a Business Type

Business Organization Forms and a Business Form Selection Checklist

business type
••• yellowdog/Image Source/Getty Images

Business Organization Types

You may have heard people talk about “Sub-S” corporations, LLCs and PCs and their relative merits. You will need to decide which form of business is right for you based on criteria such as:

  • Ease and cost of formation
  • Administration and record keeping
  • Taxes
  • Liability, and more.

Here is a checklist of factors to consider in selecting a business type.

Brief Descriptions of Business Types

Here is a brief description of each form:

    The Business Type Checklist

    Understanding the different business types is interesting, but it doesn't help you decide which type to select. Here are some factors to consider:

    • Are you just starting your business? If so, you may want to select a simple type like a sole proprietorship. You can always change later.
    • Are you working alone, with no employees? In this case, a sole proprietorship or single-member LLC might be the best option for you.
    • Do you sell products which could be misused or subject you to liability? You probably want a corporate structure to shield your personal assets from the liabilities of the corporation.
    • Are you working with other professionals in a group? A partnership or a multiple-member LLC might give you protection against liabilities and allow all members of the group to have a say in the day-to-day running of the business.
    • Do you have silent partners or investors who don't participate in running the business? A limited partnership or a corporation allows shareholders or limited partners.
    • Do you already have a corporation but you want lower taxes and simpler operations? You may be able to elect an S corporation status.

    These are just some of the considerations in selecting a business type.

    Before you make a decision, talk to several advisors, including an attorney and a tax expert.