Educational comparison

Explore common business structures

Use your goals to prioritize structures worth discussing with a qualified tax professional or attorney. This tool does not select or form an entity for you.

Educational priority order

Structures to research first

The order changes as you update the answers. It is not a legal or tax recommendation.

Sole Proprietorship

A single owner testing or operating a simple business without a separate entity.

Research first

Simple administration

Owner and business are not legally separate

Business activity generally flows to the owner's return

May be appropriate only after considering liability and tax questions

Single-Member LLC

One owner wanting a separate state-law entity and flexible tax treatment.

State filing and ongoing requirements apply

Tax treatment may begin similarly to a sole proprietor

Separate finances and records remain important

An LLC does not automatically create every form of protection or tax savings

S Corporation Tax Election

An eligible entity considering payroll and pass-through tax treatment after professional analysis.

This is generally a tax election, not a state-law entity type

Eligibility, payroll, compensation, and filing requirements apply

It is not automatically beneficial for every profitable business

Professional analysis should compare costs, savings, and compliance obligations

Partnership or Multi-Member LLC

Two or more owners sharing ownership, responsibility, profit, and decision-making.

A written operating or partnership agreement is important

Ownership, contributions, distributions, and authority must be clear

Separate business-return requirements may apply

Partner disputes and exit terms should be addressed professionally

Nonprofit Corporation

Mission-driven organizations pursuing qualifying charitable or public purposes rather than private owner profit.

State formation and federal exemption are separate processes

Governance, board, reporting, and purpose restrictions apply

Revenue is not automatically tax-exempt

Legal and tax guidance is strongly recommended

C Corporation

Businesses seeking corporate ownership, reinvestment, outside investors, or a structure designed for larger growth.

Separate corporate taxation generally applies

Formal governance and recordkeeping are important

May be preferred by some investors

Tax, legal, compensation, and exit planning require professional review

Questions to bring to a professional

• How do ownership, liability, and state requirements affect this choice?
• What are the filing, payroll, bookkeeping, and ongoing compliance costs?
• How will profits, losses, owner pay, distributions, and benefits be treated?
• What happens when an owner leaves, dies, sells, or becomes unable to work?
• Would a later tax election be more appropriate than choosing it immediately?

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