LLC (Limited Liability Company)

S-Corporation

A special tax designation available to eligible corporations and LLCs that allows business income to pass through to shareholders' personal tax returns, avoiding the double taxation that C-corporations face. To qualify, the business must have no more than 100 shareholders, all of whom must be US citizens or residents, and the company can only issue one class of stock. S-corps also allow owner-employees to potentially reduce self-employment taxes by splitting income between salary and distributions.

C-Corporation

The standard corporate structure in which the business is treated as a separate legal entity and taxed independently from its owners, resulting in what is known as double taxation on both corporate profits and shareholder dividends. C-corporations can have unlimited shareholders, multiple classes of stock, and are the structure required for companies that plan to go public or seek venture capital funding. Despite the double taxation, C-corps offer advantages like the ability to retain earnings and provide employee benefits that are tax-deductible.

Sole Proprietorship

The simplest business structure in which a single individual owns and operates the business with no legal distinction between the owner and the business entity. While easy and inexpensive to set up, a sole proprietorship offers no personal liability protection, meaning the owner's personal assets are at risk for business debts and lawsuits. All business income is reported on the owner's personal tax return and is subject to self-employment tax.

Partnership

A business structure in which two or more individuals share ownership, responsibilities, profits, and liabilities of a business. Partnerships come in several forms, including general partnerships where all partners share liability equally, and limited partnerships where some partners have limited liability and a more passive role. Partnership income passes through to the partners' individual tax returns, avoiding corporate-level taxation.