More Than 40 Years Of Legal Service To The Baton Rouge Region
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Photo of Professionals at Ezell Law Firm, LLC
More Than 40 Years Of Legal Service To The Baton Rouge Region

Choosing the right business formation for your new company

On Behalf of | May 10, 2024 | Business Formation, Business Law |

Baton Rouge Legal Blog

Starting a new company involves many decisions, and one of the most important is choosing the correct type of business formation. The structure you choose impacts your liability, taxes and ability to raise money.

Business structures vary, and each has its unique benefits and drawbacks. Understanding the various types of business formations available can help you make an informed decision.

Sole proprietorship

A sole proprietorship is the simplest form of business structure. In this setup, one person owns and manages the entire business. Since it does not require formal registration, it is relatively easy to establish. However, the owner assumes unlimited liability, meaning that personal assets could be at risk if the business encounters financial trouble.


A partnership involves two or more people who share the business’s profits and losses. In a general partnership, all partners bear unlimited liability for business obligations. Limited partnerships, however, include limited partners who receive liability protection but do not actively manage the business. This structure allows them to invest without taking on the risks of daily operations.


A corporation is ideal for raising significant funds or planning to go public. It provides strong protection from personal liability but involves complex regulations and higher setup costs. Corporations can choose to be taxed as a C corporation or an S corporation. An S corporation allows profits to pass directly to shareholders, preventing double taxation, while C corporations face taxes on both business profits and shareholder dividends.

Limited liability company

An LLC protects all its members from personal liability. This structure combines the liability protection of a corporation with the pass-through taxation of a partnership. Profits and losses flow directly to members’ personal tax returns, helping them avoid the double taxation faced by corporations.

It is a good idea to consult with a legal or financial advisor to fully understand the implications of each business structure. Professionals can provide personalized advice based on your business’s specific needs, which can prevent unexpected issues and help ensure your business’s long-term success.