What Is a Legal Structure?

A legal structure is an organizational framework for how a business entity operates. Also called a business structure, a business form, or a business ownership structure, the proper legal structure depends on the size and type of your business and your business goals.

Typical business legal structures include sole proprietorships, limited liability companies (LLCs), partnerships (such as LLPs), and corporations.

Factors To Consider Before Choosing Your Legal Structure

Different legal structures come with distinct advantages and disadvantages. In most cases, the criteria you will evaluate to select the right format involve the following:

• owner liability
• expenses and procedures needed to create and run the business structure
• how the business will be taxed
• investment needs

Owner liability: The more risk involved with the service or product your business provides, the more important owner liability becomes.

Both corporations and LLCs offer business owners some personal liability protection against someone making claims against the business. In fact, this protection is one of the main benefits of an LLC. Conversely, owners of partnerships and sole proprietorships have little personal protection.