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Starting a Business: Answering Your Legal Questions

Business stock photo

How should I organize my business? How is it formed, operated, and taxed?




Choosing the form of legal organization for your business is similar to buying a new car. You have to know what models are available and which features and options you desire. There are four basic "models" or types of business organizations: sole proprietorships, partnerships, limited liability companies, and corporations. The key features a business owner should consider are liability protection and desired tax treatment. Some business organizations offer liability protection for the owners. Others do not. Some business organizations are taxed as a separate entity. Others are merely conduits and all of the income and expenses flow through to the owners.

A lawyer can help you determine which type of business organization is best for your business, and can help draft important agreements – such as shareholder, partnership, and operating agreements – that will help you manage your business.

Sole Proprietorship

Partnership

Corporations

Limited Liability Companies


Last revised: 9/2016

This is one in a series of consumer information pamphlets sponsored by the State Bar of Wisconsin. This pamphlet, which is based on Wisconsin law, is intended to inform and not to advise. No person should ever apply or interpret any law without the aid of a trained expert who knows the facts, because the facts may change the application of the law.

The State Bar publishes a series of online ​consumer pamphlets addressing common legal issues that many people face sooner or later in their lives, such as buying a home, going through a divorce or small claims action, and preparing a will or estate plan. Each pamphlet conveys basic legal information and answers frequently asked questions in easy-to-understand language. 

​​© State Bar of Wisconsin