Three different ways to organize your small business

If you read this article, most likely you have taken the time to think of five steps starting a business, writing your business plan, and now ready to find out how to organize your business. There are three different ways, you can manage your business: single ownership, Limited Liability Company (or LLC) and S-Corporation. Before determining which is the best choice for you, let’s see what each of them means.

Single ownership.

This is the easiest and most common way, home based small business starts. As a single ownership, there is no real separation between you as your personal and business. You can use your social security number for a tax form and you will even pay taxes on your personal income tax refund. You must fill out the form to “do business as” or “fictitious names” to set your business name legally. The only drawback of single ownership is that because there is no difference between your business and yourself, if someone requires your business, they will sue you, which means that all your personal assets can be taken from you if you sued. So you run a little risk in this situation.


Even if you are a single owner and employees in your business, you can still choose to organize your business as LLC. The main benefit of being LLC is that it separates your personal assets from your business assets. So mentioned earlier if your business is sued, your personal assets will not be affected. Another benefit of LLC is that income is forwarded through business so you are not taxed at the end of the business and on your personal salary. However, with LLC you need to get a registered agent and there is an annual fee you need to pay. There are various ways that you can register as LLC so the best is to consult with experts before determining what is the best method for you in your area.


The s-corporation category is what I think is most confusing. To be categorized as S-Corporation requires a lot of documents, and is quite honest really only profitable if you produce a large amount of money, at least from what I see. One of the big benefits of being s-corporation is that you are only taxed on the salary you pay by your business and you are not responsible for entrepreneurial taxes. You also have the ability to sell your business as part of a retirement strategy, removing a start-up loss, and getting protection against liabilities. On the other hand, you are required to offer stocks and obtain shareholders, which can be very complicated and confusing. S-Corporations is also required to have directors and officers, routine meetings and maintain minutes from their meetings. So, you can see how S-Corporation requires a little more work.

Obviously there are pros and cons for whatever categories you decide to apply your business as and it really goes down to what you think will be the best for you. Many small business owners start as single ownership and because their business is growing well to LLC. If you are not sure what the best choice for you, you can always consult with a professional or visit your country’s web page for further guidance. Just make sure that you decide to apply your business is set as a legal entity.

Kody Zoie
the authorKody Zoie