Types of Business Structures
Last updated: December 2022
Please note that this guidance is general in nature and does not constitute legal, tax or any other type of professional advice. If you are unsure about your tax or where to find the relevant information, we suggest that you consult with a professional.
The information we request from you when you set up your Square account can vary depending on the type of business you run. The information below will help you understand the options to choose from when you get started with Square.
A sole proprietorship is an unincorporated business owned exclusively by one person. In a sole proprietorship, the business owner is the business. If you’re running a small business on your own, you can establish your business as a sole proprietorship. Being a sole proprietor doesn’t prevent you from hiring other people — sole proprietorships can have employees.
Note: In order to pay employees as a sole proprietor, you'll need an Employer Identification Number (EIN). Learn more about how to obtain an EIN in the U.S. Small Business Administration website.
While becoming a sole proprietorship can be a low-cost option, it won’t protect your personal assets: you are responsible for all company payments, debts, and expenses.
Limited Liability Company
A limited liability company (LLC) is a private business structure that combines features of a corporation and a partnership. An LLC offers personal liability protection and tax advantages as regulated by each state. As a separate entity, an LLC can protect its owner’s personal assets in the event of a dispute or bankruptcy.
An LLC can be owned by just one person or by several individuals (typically called “members”) as well as other domestic or foreign businesses. Learn more about the limited liability company business structure on the IRS website.
A partnership is established between two or more individuals to do business. Partners share profits or losses, resources, and risks. Partners can be individuals, other businesses, or public organizations. Generally, there are two types of partnerships: general partnerships and limited partnerships.
A private company (or privately held company) is a business with shares that are not traded on the stock market or issued through an initial public offering (IPO) or stock launch. The company stocks are owned and traded between shareholders privately.
Public companies can be listed or unlisted. Listed companies are registered on the stock exchange and their shares are traded openly. Unlisted public companies are firms with shares that aren’t listed on a stock exchange.