Starting a new small business can be both exciting and overwhelming. If you’ve never run your own business before, it can be difficult to know where and how to start. Choosing the right type of business structure to achieve your goals is a key decision in starting your own business. When we work with entrepreneurs starting a new busienss in our accelerator programs, one of the first conversations we have is figuring out the business structure. This guide helps you figure out which business type is right for you, along with the required documents you’ll need for each one. Here are the primary types of businesses, explained:

Sole Proprietorship

An enterprise owned and operated by an individual. Requires no state filing or agreement between owners. Once an individual starts selling goods or services, that person has created a sole proprietorship.

General Partnership

An enterprise owned and operated by a two or more people. Requires no state filing and can be created by a verbal or handshake agreement.

Limited Partnership (LP)

An enterprise owned by two types of partners: general partners with unlimited liability and limited partners whose liability is limited to the amount of their investments. Limited partners contribute money but do not have a say in how the business is operated. Must file state formation documents and pay a filing fee. Income is not taxed at the entity level.

Limited Liability Partnership (LLP)

Operates much like a limited partnership, but gives each partner protection from personal liability, with the exception of their investments in the company. Partners are protected from other partners’ debts, obligations, or liabilities resulting from malpractice, negligence, or misconduct. Must file state formation documents and pay a filing fee. Appealing to licensed professionals when they are prevented from forming a corporation or LLC. Income is not taxed at the entity level.

C Corporation

A separate legal entity owned by its shareholders. Taxed as a separate legal entity. A business tax return is filed and taxes are paid on its profits. Must file Articles of Incorporation (or Certificate of Incorporation) and pay a filing fee.

S Corporation

A standard corporation that elects to pass corporate income, losses, deductions, and credits through to their shareholders. Shareholders report their income and losses on their personal tax returns, allowing S corporation to avoid double taxation on corporate income. S corporations must file Articles of Incorporation and pay a filing fee. In order to become an S corporation, the corporation must submit a form for consideration to the IRS that is signed by all shareholders.

Limited Liability Company (LLC)

Combines the liability protection of a corporation with the tax treatment and ease of administration of a partnership. No members are personally liable and all have some control of the business. Created by filing formation documents (Articles of Organization or Certificate of Organization), at the state level and paying the required state filing fee. Ready to register your new business with the state of Louisiana? Visit geauxBIZ, the state’s one-stop website for registering your new business. When in doubt, consult with an accountant specializing in small businesses, as the type of business structure you choose will affect your income taxes.

Getting Funding For Your Business

The costs involved in starting a new business can be extensive, but luckily, so are the financial resources available to startup companies. Rather than list them all here, we’ve created an additional resource page dedicated to ways to fund your small business.