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If you’re starting a new business, you have to decide which legal form of ownership is best for you and your business. Do you want to own the business yourself and operate as a sole proprietorship? Or, do you want to share ownership, operating as a partnership or a corporation? Before we discuss the pros and cons of these three types of ownership—sole proprietorship, partnership, and corporation—let’s address some of the questions that you’d probably ask yourself in choosing the appropriate legal form for your business.
No single form of ownership will give you everything you desire. You’ll have to make some trade-offs. Because each option has both advantages and disadvantages, your job is to decide which one offers the features that are most important to you. In the following sections we’ll compare the three ownership options (sole proprietorship, partnership, corporation) on the eight dimensions that we identified previously: setup costs and government regulations control, profit sharing, income taxes, skills, continuity and transferability, ability to obtain financing, and liability exposure.
Some of the questions that you’d probably ask yourself in choosing the appropriate legal form for your business include the following:
Review the eight questions identified in this section that you’d probably ask yourself in choosing the appropriate legal form. Rate each of the questions using this scale:  not at all important;  not very important;  somewhat important;  very important;  extremely important. Select the two questions that are most important to you and the two questions that are least important to you, and explain your responses to these four questions.