How to Choose the Right Legal Structure for Your Business
Let’s be clear—choosing your legal structure is not just a box to check. It’s the foundation that determines how you pay taxes, protect your assets, and run your business day to day.
Pick wrong, and you could end up overpaying in taxes, exposing your personal assets, or dealing with way more admin headaches than you need.
The good news? we’ve got you covered. Here’s the real talk on how to choose the right fit for your business.
Step 1: Know Your Business Inside and Out
Before you even look at a list of legal structures, ask yourself:
Are you a solo operation or do you have partners?
Do you plan to stay small or scale big?
How comfortable are you with legal paperwork and ongoing compliance?
Sole Proprietorship → Best for brand-new businesses that want to keep it simple (but remember—you and your business are legally the same).
LLC (Limited Liability Company) → A flexible option that keeps your personal assets separate from business debts. Popular for small and growing businesses.
Corporation → Best for businesses seeking investors, planning to go public, or needing a more formal structure with shareholders.
Step 2: Factor in Risk and Liability
Here’s the deal—if your business has any chance of being sued (and let’s be honest, every business does), you want protection.
An LLC or Corporation creates a legal wall between your business debts and your personal assets.
If you stick with a Sole Proprietorship or General Partnership, you’re personally on the hook for everything.
Step 3: Understand the Tax Differences
Taxes aren’t one-size-fits-all:
Sole Proprietorship → Pass-through taxation; profits are taxed as personal income.
LLC → Can be taxed as a sole proprietorship, partnership, or corporation depending on what benefits you most.
Corporation → C-Corps face corporate taxes and shareholder taxes; S-Corps offer pass-through taxation but have strict ownership rules.
Pro tip: Talk to both a lawyer and an accountant before locking in your choice.
Step 4: Don’t DIY Your Decision
Real talk—this is not a decision you should make without expert advice. Legal and financial professionals can help you:
Weigh your risk tolerance.
Minimize your tax bill.
Ensure you’re set up for growth.
Need Help Protecting Your Biz Beyond the Paperwork?
And if you need help with the legal side—contracts, trademarks, compliance—The Legalmiga Library® and Legalmiga® Membership give you affordable, first-gen-friendly legal support all year long.