Which Business Structure Best Fits Your Company? [Quiz]

Posted July 1, 2016 by Justworks in Running a Business 101
When it comes to the difference between LLCs and sole proprietorships, classifying a company entity changes how owners get paid.

It’s a dilemma you may not have considered when starting a company: what’s the best way to receive a salary as an entrepreneur?

In order to determine that, you must first decide what type of business entity you have. Then can pay yourself the right way.

If you’re a small business owner, your business entity likely breaks into three types: LLC, partnership, or sole proprietorship.

Which business entity best fits your company?
Take the Quiz

Sole Proprietorship

Sole proprietorships are the most common way to start a business. However, it comes with a large degree of responsibility.

With a sole proprietorship, owners are completely accountable for all business gains and losses. That includes debts, liabilities, and profits.


Much like a sole proprietorship, partnerships take all financial responsibility for a company — whether good or bad.

However, that burden is divided by two or more people who share ownership of the company.


An LLC (or Limited Liability Company) generally exempts owners from using their personal finances in case of liability or loss.

However, it’s still taxed as a multi-member partnership or single-member sole proprietorship, and you’ll have to obtain licenses and permits (along with proof) to gain this status.

Want to find out which entity best fits your company’s goals? Take the interactive quiz here.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.