Legal structure of a company defines the way a business is organized, owned and operated. It is a formal arrangement between individuals or organizations that involves elements such as operation, taxation and ownership. The most common legal structures for business entities include sole proprietorship, partnership, corporation and limited liability company. Each type of legal entity has its own advantages and disadvantages which vary depending on the needs of the particular business. Factors such as size, ownership, taxes and location need to be taken into account when deciding on the best legal structure for a company. By understanding the different types of legal entities and weighing up their pros and cons, an informed decision can be made to ensure the successful establishment of a business.