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Business Structure

Business Entity Comparison

Compare business structures side-by-side. Choose the right entity for tax savings, liability protection, and long-term growth.

Quick Savings Estimate

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Side-by-Side Comparison

Compare key features, benefits, and costs

Sole Proprietorship

SE Tax: 15.3% + Income Tax

PROS

  • ✓Simplest to start
  • ✓No formation costs
  • ✓Complete control
  • ✓Easy tax filing (Schedule C)
  • ✓No separate tax return

CONS

  • ✗Unlimited personal liability
  • ✗Pay SE tax on all income (15.3%)
  • ✗Harder to raise capital
  • ✗Less professional image
  • ✗No tax benefits

BEST FOR:

Side hustles, low-risk businesses, testing ideas

Setup Cost$0
Annual Cost$0-50

LLC (Single Member)

SE Tax: 15.3% + Income Tax

PROS

  • ✓Limited liability protection
  • ✓Easy to set up ($100-800)
  • ✓Flexible management
  • ✓Pass-through taxation
  • ✓Professional image

CONS

  • ✗Still pay SE tax on all income
  • ✗State filing fees
  • ✗Annual reports required
  • ✗No tax savings vs sole prop
  • ✗Piercing corporate veil risk

BEST FOR:

Low to moderate income, liability concerns, simple structure

Setup Cost$100-800
Annual Cost$100-500

S-Corporation

Payroll Tax on Salary Only + Income Tax

PROS

  • ✓Limited liability protection
  • ✓Reduce SE tax significantly
  • ✓Take distributions (no SE tax)
  • ✓Professional credibility
  • ✓QBI deduction eligible

CONS

  • ✗Payroll requirements
  • ✗More paperwork
  • ✗Reasonable salary required
  • ✗Accountant fees higher
  • ✗State S-Corp tax (some states)

BEST FOR:

Net income $60,000+, service businesses, consultants

Setup Cost$500-2,000
Annual Cost$1,500-3,500

C-Corporation

21% Corporate + Individual Tax on Dividends

PROS

  • ✓Strongest liability protection
  • ✓Easier to raise capital
  • ✓Stock options for employees
  • ✓Unlimited shareholders
  • ✓Corporate tax benefits

CONS

  • ✗Double taxation
  • ✗Complex requirements
  • ✗More expensive to maintain
  • ✗Corporate formalities
  • ✗Higher compliance costs

BEST FOR:

Venture-backed startups, high-growth companies, going public

Setup Cost$1,000-3,000
Annual Cost$3,000-10,000+

Which Entity is Right for You?

Quick decision guide based on your situation

Choose Sole Proprietorship if:

  • You're testing a business idea or side hustle
  • Net income is under $30,000/year
  • You want the absolute simplest structure
  • Business risk/liability is very low

Choose LLC if:

  • You need liability protection but not tax savings
  • Net income is $30,000-$60,000/year
  • You want flexibility and simple taxation
  • Real estate investing or rental properties

Choose S-Corporation if:

  • Net income is $60,000+/year (tax savings justify costs)
  • You're a consultant, contractor, or service professional
  • You want to minimize self-employment tax
  • You're willing to run payroll and handle more paperwork

Choose C-Corporation if:

  • You're seeking venture capital or investors
  • You plan to go public (IPO)
  • You need to offer stock options to employees
  • High-growth technology or SaaS company

Important Note

You can change your entity structure later! Many businesses start as LLCs and elect S-Corp taxation when income grows. Others start as S-Corps and convert to C-Corps when raising capital. Work with a CPA to determine the best path.

Need Help Choosing the Right Entity?

Schedule a consultation to discuss your specific situation and develop a customized entity strategy.

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