The most common business structures are proprietorships, partnerships, and corporations. A proprietorship is simply a one-owner business. It is the most prevalent form (on the order of 70% of all businesses) because it is the simplest and least expensive to start.

A partnership is basically a proprietorship for multiple owners. Most are general partnerships, where each partner is held liable for the acts of the other partners. A limited partnership allows for general and limited partners; limited partners' liability is limited to their contributed capital.

If you choose to go into business with a partner, be sure to prepare a formal, written partnership agreement. This should address the contribution each will make to the partnership, financial and personal; how business profits and losses will be apportioned; the salaries, and financial rights of each partner, and; provisions for changes in ownership, such as a sale, succession, or desire to bring in a new partner.

The corporation is a legal entity, separate from its owners. It is a more secure and better-defined form for prospective lenders/investors. Incorporation is perceived as limiting the owner's liability, but personal guarantees are generally required whenever there is liability exposure.

The traditional form is called the C-Corporation. An S-Corporation is frequently preferable as a start-up form, since the losses expected in the early stages of the business may be applied to the owner's personal tax return. Other forms include the LLC, or Limited Liability Corporation; Trusts, often for a specific time frame or purpose, and; combinations of legal entities such as