Choosing the Right Business Entity

You’ve made the decision to start your own business – congratulations! You are likely filled with excitement, and probably some anxiety too. You may be thinking, “where am I going to get customers,” “how much should I save for taxes,” and “what kind of business entity should my business be?” While we may not be able to find your customers for you, we can provide valuable insight into whether you should structure your business as a corporation, an LLC, or even a partnership.


What are my options?

We often think of a “company” as being a corporation. However, there multiple types of business entity, each with distinct features and legal requirements. At the end of the day, your business entity controls who actually owns the business, how a business is taxed, and how liability is distributed for the company’s actions.


Sole Proprietorship

If you are starting a business on your own, you may simply choose to be a sole proprietor. This is the most basic form of business ownership in which one owner is responsible for running the company and is entirely responsible for any acts of the company. Thus, this option does not provide any kind of limitation on an individual’s liability in the case of a lawsuit. Meaning, if you are sued for something your business did or did not do, your assets may be in jeopardy.



As the name implies, partnerships are a business structure in which 2 or more individuals act as partners with respect to the going concerns of the business. Partners can be either general or limited. General partners share profit and liability equally. In a limited liability partnership (“LLP”) a general partner will remain generally liability for the company’s acts and omissions while limited partners will be shielded from liability with respect to the acts of other partners as determined in a partnership agreement.


Limited Liability Company

The Limited Liability Company, or LLC, is perhaps the most common form of business entity established today. An LLC provides both the flexibility of a partnership and the liability protection of a corporation. Members of an LLC are shieled from liability for the company’s debts, acts, and obligations.[1] This structure is therefore ideal for a small business as it provides liability protection and a business form that can grow and change.



The classic corporation is a staple in our economic system due to its robust structure and liability protections. A corporation is owned by shareholders but is managed by appointed directors. Directors are subject to fiduciary duties requiring them to make decisions in the best interest of the corporation and the shareholders. Because ownership and management is so specifically separated, shareholders, officers, and directors of a corporation are not liable for the company’s debts, liabilities, or obligations.[2]


 What business entity should I use?

The distinctions described above are just some of the differences between the various types of business entities available in Michigan. Other key differences include how the business is taxed, managed, and owned. Now that you know what your options are, contact our business attorneys at Lansing Legal Group, PLLC, for guidance as to which business entity would suit your needs and goals best. We take all aspects of your life and business into consideration when helping you get your business off the ground.


[1] MCL 450.4501

[2] MCL MCL 450.1317