Deciding Your Business’s Ownership Structure

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The first step in starting a new business is deciding if you’re going to form the company as a sole proprietorship, partnership or limited liability corporation. Before you make such an important decision, however, it’s imperative that you understand the key differences among the three ownership structures. In this blog, we’ll break down what each structure entails and how it may affect your business endeavors.

Sole Proprietorship

A sole proprietorship is a one-person business. While this type of ownership structure is simple to set up, you’ll need to keep yourself up to date on the business law that applies to sole proprietorship. In order to make your business legitimate, you’ll need to adhere to local registration guidelines, business licenses and permit laws. As you move forward in building your new business as a sole proprietorship, remember that you are solely responsible for paying both income taxes and any business debts you may owe.


A business that is owned by more than one person but has not filed papers with the state to become a LLC, is considered a partnership. Typically, partnerships fall into two categories – limited and general partnerships. General partnerships is when all partners participate in the daily upkeep and management of the business. Limited partnership, however, gives at least one partner control of daily operations while the other partners are responsible for contributing to the business’s capital. Typically, limited partners have little control over day-to-day operations and decisions.

Limited Liability Corporation

An LLC ownership structure can be described as a combination of a sole proprietorship or partnership with the limited liability of a corporation. If you decide on starting your business as an LLC, you’ll be reporting business profits and losses on your personal income tax returns. LLCs protect you from being personally liable for business debts and claims. Should your business face a legal battle, the only thing at risk are the business assets.

Starting a new business can be an exciting time in your life, but it’s one that should not be faced alone. Our Houston business law attorneys from Toppins Law Firm, P.C. have the skill to assist you with all your business matters and the know-how to decide which business entity best suits your needs. Call our firm today at 713.574.2299.