Choosing an entity type for your business is a major decision. Fortunately the best choice is often straightforward given your business objectives. The type of business structure you choose will depend on three primary factors: liability, taxation and record-keeping.

A “DBA” is the default, or ‘no choice’ choice. It basically means you haven’t chosen any business formation and you are personally liable and personally taxed for all the business you do. DBA stands for ‘Doing Business As,’ which is to say that you, personally are doing business as (insert any business name here).

A corporation can limit your liability and creates a personal liability shield so that if your business fails or someone gets hurt, in many cases they cannot sue you personally. A corporation is also taxed as a separate entity from the owners and is subject to a number of formal management rules. It is a fairly complex form of business and was most popular before Limited Liability Companies were established in the mid 1980’s.

A Limited Liability Company provides the liability shield that a corporation does but has fewer formal rules regarding formation and management. It can also provide “pass through” taxation which is to say you do not have to file a separate income tax return for the business, the profit and loss can, in most cases, simply be added to your own income tax return as a “pass through” amount.