What Type of Company Should I Start?

It can sometimes be difficult for an individual with no prior information to decide on the type of company to start. The business you should venture into should be one you’re passionate about or feel can go a long way in solving other people’s needs. Considering the many business types available, you might be asking: what type of company should I start?

If you’re wondering what type of company to start, keep your eyes on this article. It promises to proffer a solution to your dilemma. As you read, you will gain knowledge that will direct you to make the right choice. 

Four Major Types of Businesses

Understanding the types of businesses available is key to choosing the company that suits you best. There are four significant types of business structure. These are the sole proprietorship, corporation, partnership, and Limited Liability Company.

Let’s discuss these business types in detail.

1. Sole Proprietorship

The sole proprietorship is the simplest business structure. The business owner is responsible for all aspects of the company, its finances, physical location, assets, and liabilities. This means that when you start a sole proprietorship, you are personally at risk for any debt your business incurs.

The business’s income is also entirely yours. Also, the name, mission, and vision statements are for you to decide. People venture into sole proprietorship for its simplicity and because the income is solely theirs. 

The sole-proprietorship business is an excellent choice for entrepreneurs that want complete control of their business. It’s easy to set up, the entrepreneur makes business decisions, and all profits go to the owner. As with the profits, the owner of this business is solely responsible for the debt and legal matters. 

2. Partnership

A partnership involves two or more persons agreeing to carry on a trade or business. Each partner is an equal owner who invests their money, time, and effort. In partnerships, each member owns a specific part of the business. The profits and responsibilities of this type of business are shared between its partners.

Partnerships are a great choice because the company can utilize each partner’s experiences and resources. However, due to its complexity, a partnership might not be a good choice for first-time startups. This business setup can be capital-intensive; it also requires lots of legal responsibilities like registration.

Partnerships are the expansion of sole proprietorship. If you want to go into a partnership, make sure you are comfortable with whoever you are going into a business with.

3. Limited Liability Company

A Limited Liability Company (LLC) is an entity created under state statutes as a legal business structure with specific regulations guiding it. This business type combines the characteristics of a corporation, sole proprietorship, and partnership. The state law enables the company to limit its potential liability to current and future shareholders. There’s better protection of personal assets since liability is lower. 

The business entity is not taxed as a separate business; profits and losses are moved to its members. The benefits of this type of business are pretty numerous. It’s easy to begin and allows an unlimited number of shareholders. Also, personal liability is lower, and the profit distribution is flexible.

A setback of this business type is that it’ll likely be dissolved if any of its partners leave. The remaining members will take care of the financial and legal responsibilities and obligations in terminating the business.

4. Corporation

A corporation is a group of people or companies that come together to function as a single legal entity. The company is, therefore, separate from its owners. The continuance of this structure is not dependent on the exit of any of the stakeholders or directors. Investing in a corporation protects you from business risks.

A corporation has unlimited life as the exit of a shareholder doesn’t mark its end. Ownership shares can be transferred to another person. This business type is great because it offers the best protection again personal liability. Also, obtaining startup capital is relatively easy.

However, there are also disadvantages. The setup can be expensive and complicated due to record-keeping, operations, and reporting. It can also be challenging to continue running. 

What Type of Company Should I Start?

What type of company should I start? This question is pretty common amongst aspiring entrepreneurs who want to build a company from the ground up. How do you know what company to start?

Consider the vital questions below. The answers to the questions will allow you to scope out what company you want to start.

  • What is your budget?
  • What are your experiences?
  • Do you need to partner with someone?
  • What is your passion?
  • Who are your potential competitors?
  • What are your business goals?
  • What problems do you seek to proffer a solution to?

Your choice of business type would depend on the following:

1. Flexibility

Flexibility is essential in business and key to success. Your kind of company should allow for maximum flexibility for its owners.

If you don’t allow others to contribute to the company’s growth, you’re essentially threatening your company’s potential. In this case, a sole proprietorship would be best for you.

2. Liability

Understand the potential risks involved in each business type before deciding on which you can afford to start.

Sole proprietorship are the riskiest, as the owner bears all the losses and takes full responsibility for the company if it fails. On the other hand, corporations offer the best protection against personal liability. 

3. Complexity

Every business type comes with its level of complexity. So it helps to understand the complexities associated with each before you decide which to get into.

4. Control

The level of control you want over your business will determine the structure you’ll set up. If you’re going to make decisions about your business yourself, and have the time to build your company, you should consider a sole proprietorship. 

5. Capital Investment

Capital is the key determining factor in your choice of business. The type of company you would start will be based on the capital you have to invest.

You’ll need to get a physical structure and other machinery for your business. You’ll also need to invest human capital in running a successful business. 

person wearing yellow sweater and write band using laptop computer
Photo by Christin Hume on Unsplash


The first step to deciding the type of company to start is understanding the pros and cons of each type of business. Ensure that the company type you are considering suits your goals and the amount of risk you are comfortable taking

This guide provides a detailed description of each company type and its pros and cons to help you make an informed decision. 

Abir is a data analyst and researcher. Among her interests are artificial intelligence, machine learning, and natural language processing. As a humanitarian and educator, she actively supports women in tech and promotes diversity.

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