Compare LLC, S-Corp, C-Corp, Sole Proprietorship & Partnership to find the best structure for your business
The simplest business structure where you and your business are one legal entity. Easy to set up but offers no personal liability protection. Best for low-risk, solo ventures testing an idea.
A business owned by two or more people. General partnerships offer no liability protection, while limited partnerships protect passive investors. Requires strong partnership agreements.
The most popular choice for small businesses, combining liability protection with tax flexibility. Owners (members) are protected from business debts, and you can choose how to be taxed.
A tax election (not a separate entity type) that allows LLC or C-Corp owners to save on self-employment taxes by paying themselves a reasonable salary and taking the rest as distributions. Best for profitable businesses.
A separate legal entity that can raise unlimited capital, issue multiple stock classes, and go public. Subject to double taxation but offers the most flexibility for growth. Best for venture-backed startups.
Choose Sole Proprietorship if: You're testing a low-risk business idea, have minimal revenue, and want the simplest setup.
Choose Partnership if: You have co-founders, want to share profits/losses, and don't need liability protection (rare).
Choose LLC if: You want liability protection, tax flexibility, and a simple structure. Best for most small businesses.
Choose S-Corp if: Your LLC is profitable ($50k+ net income) and you want to save on self-employment taxes.
Choose C-Corp if: You're raising venture capital, plan to go public, or need multiple stock classes.
| Entity Type | Taxation Method | Self-Employment Tax | Tax Filing |
|---|---|---|---|
| Sole Proprietorship | Pass-through (Schedule C) | 15.3% on all profit | Personal return (1040) |
| Partnership | Pass-through (K-1) | 15.3% on all profit | 1065 + personal 1040 |
| LLC (default) | Pass-through | 15.3% on all profit | Depends on structure |
| S-Corp | Pass-through (K-1) | Only on salary | 1120-S + personal 1040 |
| C-Corp | Corporate tax (21%) | No (but double taxation) | 1120 + personal 1040 |
| Entity Type | Formation Cost | Annual Fees | Complexity |
|---|---|---|---|
| Sole Proprietorship | $0 - $100 | $0 - $50 | Very Low |
| Partnership | $50 - $500 | $50 - $200 | Low |
| LLC | $50 - $500 | $50 - $800 | Medium |
| S-Corp | $100 - $800 | $200 - $1,500 | High |
| C-Corp | $200 - $1,000+ | $500 - $3,000+ | Very High |
Our calculators use industry-standard formulas sourced from authoritative references including government agencies, academic institutions, and professional organizations. We validate all calculations against multiple independent sources.
Results are estimates for educational purposes. Professional advice from a licensed expert is recommended for important financial, health, or legal decisions.
Yes. You can convert from sole proprietorship to LLC, LLC to S-Corp (via tax election), or even dissolve and reform as a different entity. However, some conversions are easier than others. LLC to S-Corp is just a tax election (Form 2553), while converting a sole proprietorship to an LLC requires forming a new entity.
This is the most popular structure for profitable small businesses. You form an LLC for liability protection and simplicity, then elect S-Corp taxation (Form 2553) to save on self-employment taxes. You get the best of both worlds: LLC flexibility with S-Corp tax benefits.
Generally when your net profit exceeds $50,000-60,000 annually. At that level, the self-employment tax savings (you'll pay 15.3% SE tax only on your salary, not all profit) outweigh the added complexity and costs of payroll.
For simple situations (solo LLC, small partnership), you can DIY using online formation services like Northwest Registered Agent or Incfile. For complex situations (multiple owners, raising capital, high liability risk), consult a business attorney and CPA to ensure you choose the right structure and draft proper operating agreements.
"Inc" stands for Incorporated and refers to corporations (C-Corp or S-Corp). LLCs are a separate structure. The main differences: corporations have shareholders and stock, LLCs have members and membership interests. Corporations require more formalities (board meetings, minutes), while LLCs are more flexible. For liability protection, both offer similar benefits.
Yes. Non-US citizens can form LLCs and corporations in most states. Delaware, Wyoming, and New Mexico are popular choices for non-residents. You'll need a registered agent in the state of formation and may need an EIN (Employer Identification Number) from the IRS.
Expect $2,000-5,000 annually including: state filing fees ($200-800), payroll processing ($500-1,500), accounting/bookkeeping ($1,000-2,500), and tax preparation ($500-1,500). The savings on self-employment tax often exceed these costs once profit exceeds $60k/year.
Not necessarily. If you're freelancing or consulting with low liability risk and earning under $20k/year, a sole proprietorship (DBA) is simpler and cheaper. Once you have significant revenue, assets to protect, or liability concerns, form an LLC for protection.
Get a free consultation with a business formation specialist. We'll review your situation and recommend the best entity structure, handle formation paperwork, and set up your compliance calendar.