Choose Your Business Entity

One of the first decisions when starting a new business is deciding which legal structure your business will take.

Limited Liability Company (LLC)

A hybrid between a corporation and a partnership that provides liability protection with tax flexibility.

Advantages

  • Limited liability protection
  • Tax flexibility
  • Less complicated structure
  • Pass-through taxation

Disadvantages

  • Usually more expensive to form than a DBA
  • Requires more paperwork and formalities
  • Self-employment tax

Regular Corporation (C-Corporation)

A separate legal entity that provides the strongest protection from personal liability.

Advantages

  • Maximum liability protection
  • Easier to raise capital
  • Perpetual existence
  • Tax deductible benefits

Disadvantages

  • Double taxation
  • More expensive to form and maintain
  • Complex regulations
  • Extensive record-keeping

S-Corporation

A special type of corporation that provides liability protection while avoiding double taxation.

Advantages

  • Pass-through taxation
  • Limited liability protection
  • Tax savings on self-employment
  • Professional image

Disadvantages

  • Strict qualification requirements
  • Limited to 100 shareholders
  • Complex formation process
  • More IRS scrutiny