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Deciding on the right type of business structure

On Behalf of | Dec 7, 2021 | Business Law

When a person wants to start a business, he or she may want to understand what type of business structure is the right one to use. In Pennsylvania, there are four main types of business structures, each with their own advantages and disadvantages. Each business structure has its own registration requirements, fees and filing requirements.

Sole proprietorship and partnerships

With a sole proprietorship, an individual has sole control and responsibility for the business. This is the most common type of business structure. Sole proprietorships require fewer forms to establish, the owner retains the profits and it’s also easier to stop operating the business if the owner decides to do so. However, the owner has unlimited personal liability.

Partnerships are similar to sole proprietorships except they are formed with two or more people. The parties should have a written agreement which includes each partner’s contributions and plans for the distribution of profits and losses.

There are two types of partnerships, general and limited. General partners have personal liability for the business. Limited partners are not part of the day-to-day management of the business and they also have limited personal liability.


A corporation is the most complex type of business structure. These business structures require significant paperwork and record keeping. They may also be subject to two types of taxation, taxes for the corporation and taxes for the individual owners.

Although business owners in Pennsylvania can change business structures over time to meet the needs of their organization, it can be helpful to thoroughly consider the best type of structure early on. An experienced business law attorney can help owners determine the right fit.