What Type of Business Should a Consultant Have? - A Comprehensive Guide

As a consultant, you have a lot of options when it comes to setting up your business. From LLCs and C Corporations to sole proprietorships, there are many different structures to choose from. Each one has its own advantages and disadvantages, so it's important to consider the legal implications of your chosen structure. Forming an LLC or a C Corporation offers the flexibility of a small operation while protecting your assets from potential liabilities.

This means that if someone sues you or your business cannot pay its debts, your personal finances and assets would be protected from being used to settle those legal obligations or financial debts. However, forming and maintaining an LLC requires paperwork and fees, so if you prefer not to deal with that, then you could opt for a sole proprietorship. No matter what size your consulting business is, there are plenty of ways to build a successful business as a consultant. In this guide, we'll discuss the different types of business structures available for consultants, the benefits of formalizing your business structure, and the tasks you need to perform in order to get your business up and running.

Types of Business Structures for Consultants

The most popular types of business structures for consultants are LLCs and C Corporations. An LLC (Limited Liability Company) is a type of business entity that combines the pass-through taxation of a sole proprietorship or partnership with the limited liability protection of a corporation. This means that the owners of an LLC are not personally liable for the debts and obligations of the company. A C Corporation (also known as a C Corp) is a type of corporation that is taxed separately from its owners.

This means that the profits and losses of the corporation are reported on its own tax return, rather than on the personal tax returns of its owners. C Corps also offer limited liability protection for their owners, meaning that their personal assets are protected from any liabilities incurred by the company.

Benefits of Formalizing Your Business Structure

Formalizing your business structure as a consultant has many benefits, including:
  • Liability protection: Forming an LLC or C Corporation provides a legal shield (corporate veil) between your consulting company and your personal assets.
  • Tax savings: LLCs and C Corps can take advantage of certain tax deductions that are not available to sole proprietorships.
  • Increased credibility: Having a formalized business structure can help you gain credibility with potential clients.

Tasks You Need to Perform to Get Your Business Up and Running

No matter what type of consulting you do, there are some tasks that must be performed in order to get your business up and running. These include:
  • Choosing a name: You'll need to choose a name for your consulting business that is not already in use by another company.
  • Registering with the state: Depending on the type of business structure you choose, you may need to register with your state's Secretary of State office.
  • Obtaining licenses and permits: Depending on the type of consulting services you provide, you may need to obtain certain licenses or permits.


Choosing the right type of business structure for your consulting business is an important decision that should not be taken lightly.

From liability protection to tax savings, there are many benefits to formalizing your business structure as a consultant. The emergence of digital consulting and the rise of globalization have opened up more opportunities for business consulting, so it's important to consider all aspects before making your decision.

Dominic Mccoard
Dominic Mccoard

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