The legal form of the business is one of the first decisions that a small business owner will have
to make. Because this decision will have long-term implications, it is important to consult an
attorney and an accountant to help make the right choice. The following are some factors the
small business owner should consider before making the choice: 
• The owner’s vision. Where does the owner see the business in the future (size, nature, etc.)?
• The desired level of control. Does the owner want to own the business personally or share ownership
with others? Does the owner want to share responsibility for operating the business with others?
• The level of structure. What is desired—a very structured organization or something more informal?
• The acceptable liability exposure. Is the owner willing to risk personal assets? Is the owner willing to
accept liability for the actions of others?
• Tax implications. Does the owner want to pay business income taxes and then pay personal income
taxes on the profits earned?
• Sharing profits. Does the owner want to share the profits with others or personally keep them?
• Financing needs. Can the owner provide all the financing needs or will outside investors be needed? If
outside investors are needed, how easy will it be to get them?
• The need for cash. Does the owner want to be able to take cash out of the business?
The final selection of a legal form will require consideration of these factors and tradeoffs
between the advantages and disadvantages of each form. No choice will be perfect. Even after a
business structure is determined, the favorability of that choice over another will always be
subject to changes in the laws. 
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