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Orlando Business Lawyer / Blog / Corporate / Sole Proprietorship vs. Partnership vs. Corporation

Sole Proprietorship vs. Partnership vs. Corporation


When you first start out a business, there are a lot of decisions you need to make. One of them is your business structure. The three main ones are sole proprietorship, partnership, and corporation. The one you choose will impact your profits, taxes, legal issues, and more.

Which one is best for you? Here’s a look at the three business structures.


A corporation is a business entity that exists on its own, so the owners have little risk of liability. The most common business structures are limited liability company (LLC), C corporation, and S corporation.

The good thing about a corporation is that the company can still exist without one or more owners. Getting money to grow the company is easier. There are more investor opportunities and banks are more likely to lend money.

On the downside, there is a lot of paperwork involved to establish a corporation. There are numerous legal regulations involved. Plus, those in a C corporation face double taxation. The business’s profits are taxed, then owners pay personal income tax on their profits.


A partnership has two or more business owners who operate based on an agreement. A general partnership works like a sole proprietorship but has multiple partners. It does not have to be registered with the state.

A limited partnership, on the other hand, does have to be registered. Limited partners, however, are not usually involved in the day-to-day operations of a company. Instead, they are treated more as investors.

A partnership comes with less paperwork than a corporation, so it can be an easier way to structure a business with multiple owners. The taxes are often less. Plus, limited partners are shielded from personal liability.

On the downside, partnerships often come with personal disagreements because one person does not abide by the contract. In addition, general partners are responsible for the company’s finances in multiple ways.

Sole Proprietorship

A sole proprietorship is a one-person business. It is the most basic form of business and is the default business structure for those who own their own company. Business income flows to your personal income, so no separate tax filings are required.

With a sole proprietorship, you can run your business as you see fit. You don’t need input from anyone else, unlike a partnership or corporation. However, you face the most legal risk from this type of business structure, as you are personally responsible for the business’ debts and legal problems. There is no separation. Plus, as a sole proprietor, it’s extremely hard to get business funding.

Learn More About Corporate Law

If you’re starting your own company, you need to have the right business structure. Which one will help your business succeed?

Get the legal advice you need from Orlando corporate lawyer B.F. Godfrey from Godfrey Legal. We’ll help you understand the pros and cons of each business structure. Schedule a consultation today by filling out the online form or calling (407) 890-0023.



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