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  • Alex Kleyman

Everything You Need to Know About Business Legal Structure

Speaking of legal matters for businesses. There are a number of things business entities and their legal consultant have to consider while appearing in a court of law or getting involved in a legal matter. Businesses all around the world have to face legal jurisdictions. The structure of a business refers to the legal structure of an organization. This structure is recognized in any specific jurisdiction. However, a lot of business owners don’t know the complexities of business legal structure and the legal issues connected with it. Therefore, having the legal support of a boutique law firm NYC based or elsewhere like Kleyman Law Group is essential to deal with the legal matters involving various types of business structures.

We have put together some valuable details to help you understand the ins and outs of business legal structure and other things that you should know. Further details are given below, so read on to grasp the concept of the legal structure of a business or organization completely.

What is Business Legal Structure?

What is Business Legal Structure? | KLeyman Law Group

Here, we will try to elaborate on the business legal structure as much as possible to help you fully understand it. So, the business structure of an organization refers to its legal structure that is understood and recognized in any given jurisdiction. This business structure holds a pivotal role in determining the day-to-day operations of any business entity. It is also a key factor in determining the actions an organization is allowed to undertake. For instance, responsibility for the obligations of the business, raising capital, and the amount of taxes that a specific organization is bound to pay to the tax enforcement agencies.

Legal structures of business are a complicated matter, therefore, business owners should analyze and consider the requirements and objectives of their business in the first place. Moreover, they should know the basics and characteristics of every single business structure. Business litigation attorneys with substantial experience and expertise like the ones in Kleyman Law Group, New York City can help business owners understand the entire legal structure of a business example based to guide them in making the right choice regarding the legal structure for the business.

Types of Business Structure:

The 4 Types of Legal Structures for Business includes:

Take The four most common types of business structure found widely in the United States are sole proprietorship, partnership, corporation, and Limited Liability Company. We will discuss all these types and their further forms briefly in this section. Read on to know more details.

1. Sole Proprietorship:

Take it as an unincorporated company that is owned and managed by a single individual only. It is considered the simplest type of business, however, the downside of the sole proprietorship is it offers the least amount of protection for the owner in terms of finance and legal matters. A sole proprietorship doesn’t form a separate legal identity like partnerships or corporations. Typically, the owner of that business shares the same identity as the company. This essentially means the owner is fully liable for all types of liabilities incurred by the company, with a business structure that is referred to as the sole proprietorship.

2. Partnership:

As the name suggests, a business with a legal structure of a partnership is owned by two or more people. These people are generally termed as partners. Some types of partnerships are discussed below:

  • General Partnership

The most basic type, a general partnership. No state involvement. This is one simple type that requires a simple paper signing to conclude a partnership agreement. This agreement states several things including the splitting of profits and ownership and other different terms as per the business type and scenarios.

The owners or partners have full authority. They have free will, they do not need any approval for things like contracts and loans. All the partners (one or more) have total liability and mutual responsibility.

  • Limited Partnership

As the name suggests, limited partnerships or in short LPs are agreements formed authorized by the state. In this agreement, a business has a general partner that manages affairs of the business and limited partners that do not actively take part in business management but rather invest in to keep the company running.

The limited partner’s role is clear, they only invest and take part in the profit, and they are not responsible for any sort of debts and company-related issues. Such partners have their share in profit and cannot lose money more than they have invested. In cases, where the silent partner chooses to manage the business by himself, they are no longer considered as limited partners and loses their protections and perks as well.

For instance, if you are running a business with two or more partners where you have taken a loan for business nourishment and due to reasons, the business is unable to pay back, in such cases, your legal assets are used as compensation and to pay back the debt. If you need some entity to help you form or dissolve the general partnership, Kleyman Law Group, New York can help.

  • Limited Liability Partnership

Limited liability partnership or LLP is similar to the general partnership as per the operations are in concerts. In this agreement, every partner is active and manages the business affairs.

The difference is that it sets some limits and no one is liable for one another’s actions. The contracts, debts, and collective agreements in the business are the responsibility of everyone but individual errors are bounded, and the person commits any omission, he/she will be solely responsible for it. Such agreements are complicated and require a professional Law group involvement. For the best handling of such agreements, Kleyman Law Group, New York can help.

3. Limited Liability Company

Otherwise, known as LLC is one of the most flexible business types. LLC is a form of business that enjoys the advantages of both partnerships and corporations. Business entities with the legal structure of LLC retain the tax of sole proprietorships and the limited liability of a corporation. Moreover, such business entities are free to choose various tax treatments.

4. Corporation:

Now coming to the corporations, simply put, a corporation is a separate legal entity formed by its various shareholders. Incorporating a business helps owners stay away from personal liabilities because of the debts of the company or any legal disputes it is involved in. It is quite complicated to create a corporation if we compare it with the other 3 types of businesses. The drafting of incorporation articles is a must. These articles include data like the number of shares to be issued, the specific name and location of the business, and its objective. Here are some of the main types of corporations:

  • C Corporation:

This is the most common form of incorporation. In this form of legal structure, the corporation is taxed as a business entity, and owners are bound to receive profits, which are then separately taxed on an individual basis.

  • S Corporation:

This is quite similar to a business entity with the business structure of a C corporation, however, it may only consist of around 100 shareholders at max. Another difference between C Corporation and S corporation is the S corporation is taken as a pass-through entity like the partnership, which means the profits will not be taxed twice.

  • Non-Profit Corporation:

As a legal business structure, this is generally used by charitable organizations. Such corporations enjoy tax exemptions. However, in order to keep it free of tax, all forms of incoming cash flow should be spent on the future plans or the operations of the organization.

Can I Get the Legal Structure of a Business Example?

Now that we have briefly described all the legal structures for business, it is time to discuss some businesses that fit the examples of a sole proprietorship, LLC, partnership, and Corporation. We will discuss these examples briefly here. When we talk about the legal structure of a business example, the very first type of business that comes into our mind is the sole proprietorship, the prime example of this legal structure is the popular eCommerce store eBay. This eCommerce store eventually turned into a corporation. Thinking about the partnership, the famous computer brand Hewlett-Packard or in short HP as its name suggest is an example of a successful partnership. When it comes to LLC, a great example of LLC is Chrysler, which is one of the largest automobile manufacturers in the United States. Chrysler has maintained its business structure as LLC since its inception. Lastly, Apple the famous technology giant is known as Apple Inc., because it is listed on the stock exchange like other large companies. It is still existing even when one of its co-founders and ace of technology, Mr. Steve Jobs, has demised.

How to Choose a Business Structure:

Choosing the Right Business Structure: While making the legal structure of a business plan, it is necessary for business owners to know the pros and cons, ins and outs of every single type of business structure. There is no way you start a business without giving the legal structure of your business thought. Once you consider all these structures in detail, you will end up knowing plenty of things about each type that may act to your advantage or disadvantage at times. This is because opting for the right business structure for your business will influence the legal and operational risks, tax obligations, legal costs, clientele, and obviously the asset protection.

Starting from the sole proprietorship, for entrepreneurs, it is a good structure that offers them complete control of their business. Moreover, it is an easier and inexpensive process when it comes to establishing a sole proprietorship. Additionally, the business owners can also get tax benefits, as the income is considered as the personal income of the owner of the company. Therefore, it is only taxed once. Lastly, the number of regulations for sole proprietorships is relatively smaller. However, the only shortcoming of a sole proprietorship is it offers very little protection to the owner in terms of legal matters and finance from various liabilities.

Now coming to the partnership structure of the business, it offers more flexibility, however, it also comes with greater exposure to risk as well. LLCs on the other hand, take advantage of the limited liability status. In LLC, the company has its own legal entity, which protects the owners from personal liability for the operations and debt. Additionally, LLCs get to choose between various tax treatments and are capable of retaining their flow-through taxation status as long as it is not identified as a C corporation tax entity.

Finally, in the case of corporations, there is no risk of the business being dissolved in case of the demise of one of the business owners like sole proprietorship and partnership. Take the example of Apple Inc. it still exists even after the demise of Steve Jobs, who was one of the co-founders of Apple. This is because corporations exist as legally separate entities.

Need advice about business structures? Call Kleyman Law Group (Brooklyn, NY Commercial & Business Litigation Attorneys) Today!

If you are looking to set up your own business and want legal advice from experienced and certified commercial litigation attorneys with expertise in business development, formation, management, and modifications, then stop browsing the internet with the key phrasesmall business attorney near me. We are here to help you regarding the selection of the right legal structure of a business plan. We offer professional business development and Business litigation services at Kleyman Law Group, NYC. We will also help you draft the organizational documents that play a key role in determining the overall business structure of an organization. If you need any kind of legal advice or help from business litigation attorneys, then Call Kleyman Law Group (Brooklyn, NY Commercial & Business Litigation Attorneys) Today!


  • A business structure describes the legal structure of a company that influences the day-to-day operations of a business.

  • A sole proprietorship and partnership are simple to set up since they are not required to meet ongoing requirements such as shareholder meetings and voting.

  • A corporation and a limited liability company provide limited liability protection to their owners, which serves to prevent the owner’s personal assets from being sold off to settle the entity’s debts and liabilities.

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