How to Choose the Right Business Type to Start

Scale Up Your Business Enterprise with These 3 No-Brainer Tips Growing a Startup startup starters Right Business Type to Start

Starting a business on your own is a major decision. What’s more, for entrepreneurs who are new to the market and the whole business thing, this decision can be quite difficult to make. How exactly do you choose what type of business to start? The answer to that question mostly depends on you and what you want to achieve. However, before you make any decisions, you should take the time to conduct thorough research. That way, you can familiarize yourself with various business models and various industries on the market.

Choosing the right business model that suits your needs can be a daunting task. Still, it’s very important not to rush things in any way. Moreover, if you come up with a business idea and a business model but you discover there’s someone who’s already beaten you to it, don’t be discouraged. As a point of fact, many new businesses succeed even though they’re competing against well-established and better-funded competitors. That being said, here are a few business models to help you decide on the best course of action.

Sole proprietorship

Starting a sole proprietorship is more suited for individual entrepreneurs. If you want to start your own business as a service provider, such as a mechanic, electrician, plumber, trader and so on, then a sole proprietorship is certainly the right business type for you. What’s more, a sole proprietorship isn’t a legal entity.

Instead, the business owner represents the business itself and is solely responsible for its actions. This business type is easiest to start. It requires the least amount of paperwork, licenses, permits and fees, which also makes it the cheapest type of business to start. However, the owner is responsible for all the liability concerning the business. In other words, should someone make claims against your business, you as the owner would be held responsible at court.

Limited Liability Company (LLC)

An LLC is the most common business type that can be found on the market. Businesses that sell products or services are oftentimes LLC in structure. The main characteristic of a Limited Liability Company is that it allows a business owner to separate personal assets from company assets, thus limiting the liability of the owner.

An LLC is a hybrid structure that incorporates the features of both corporations and partnerships or sole proprietorships. Unlike with sole proprietorship, the business owner isn’t responsible for the company’s debt, provided they didn’t secure them personally through a personal credit/debit card, second mortgage or by investing personal assets, for instance. An LLC is more expensive to start, meaning it requires more fees, licenses, permits and taxes. However, the owner’s liability is greatly reduced.


Business franchising is a popular business type that many entrepreneurs opt for. This structure is better suited for entrepreneurs who are new to entrepreneurship and are uncertain whether or not they want to risk starting their own business or they’re indecisive about it. Basically, what franchising means is that an individual buys their way into an already developed business model that’s supported by a brand or a trademark.

However, before you opt for this business type, it’s important that you obtain all the necessary franchise information that will help you familiarize yourself with the concept. The way it works is that a franchisor provides you with the location, inventory, funds and training to run their franchise. They also provide you with developed marketing strategies and staff to help you run things smoothly. However, a franchisor makes all the important decisions, leaving you with limited flexibility when it comes to business operations.


A partnership business type is best suited for entrepreneurs who want to work together with others in order to develop a business successfully. The most common partnership businesses are law firms, dentists, doctors and so on. The purpose of this structure is to have multiple service professionals who will share expertise, knowledge and skill in order to grow their business and share profits.

It’s a good way to start a business or a practice, especially since everyone can pitch in to start the business. However, in terms of liability, partnerships share the same features as a sole proprietorship. In other words, the owner or the owners are responsible for the debts and actions of their business or practice.


Starting a corporation might be the most interesting business structure. The main reason is that a corporation is considered a legal entity. In other words, a corporation can buy or sell properties, it can be taxed, carry lawsuit and even commit a felony. What’s more, a corporation protects the owner from personal liability such as debt and corporate actions, but within limits, of course. Moreover, a corporation is a perpetual structure.

In other words, if the owner passes away or leaves the company for some reason, they can leave their shares to someone else who will continue with the company’s operations. In addition, a corporation is owned by shareholders, managed by a board of directors and operated by elected officers. It’s not uncommon for an individual to be a shareholder, director and an officer at the same time. This structure is the most expensive to start and it’s required to pay annual fees and provide filings to the state regularly.

There are various types of business structures to choose from and each one has its own unique advantages and disadvantages. Before you decide on which business type to opt for, make sure you do your research and familiarize yourself with how everything works.