If you are considering starting a small business, you may be trying to sort out the different types of businesses and wondering which type is best for you. Each type is best for a specific purpose or situation, relating to taxes, liability, and your ability to control the profits and losses of the business, so it is best to consult with an accountant or tax professional, when making your choice.
Sole Proprietorships
A sole proprietorship is a business operated by one individual; the business is considered part of the individual, not a separate entity. The business profits and losses are included on the individual's personal tax return, and the individual retains personal liability for the business debts and lawsuits.Corporations
A corporation is an entity which is separate from its owners. The corporation is formed under the laws of the state in which it is operating, with Articles of Incorporation.Subchapter-S Corporations (S-Corporations)
A subchapter-s corporation (or s-corp) is a corporation which has the benefits of limited liability of a corporation but which is taxed as a partnership, with the income or losses flowing through to the individual shareholders.Limited Liability Companies
A limited liability company (LLC) is not a corporation, but it has the liability protection of a corporation and other benefits, like ease of formation. You can have a single-member LLC which pays taxes like a sole proprietorship, or a multiple-member LLC which pays taxes like a partnership. You can even have an LLC that's taxed like a corporation. There are few drawbacks to forming an LLC.You may also want to look into the Series LLC, a new type of LLC which is available in a few states. In a Series LLC, you can have a parent LLC and many sub-LLC's, each with separate liability.