Should My Business Be a Corporation, Partnership, or an LLC?

What legal structure is best for my start-up business?

There are six typical structures for a startup business: sole proprietorships, general partnerships, limited partnerships, Limited Liability Companies (LLCs), S corporations, and C corporations. While sole proprietorships and general partnerships are simple, they have one significant drawback - that the owners have personal liability for the debts of the business.

Corporations, if properly formed and operated, generally provide the shareholders protection from personal liability. S corporations generally give you tax benefits, with only one level of tax on income of the business. C corporations have two levels - one at the corporate level on income earned and one at the shareholder level for any dividends received from the corporation.

LLCs can give you the tax benefits of partnerships (one level of tax) with the limited liability of corporations. However, LLCs can be more complicated and expensive than S corporations.

The bottom line will depend on your individual situation, but think seriously about S corporations for your start-up business.

No two situations are the same, but think seriously about setting up your new business as an S corporation. There are Web sites that can help you start your business, whether by setting up a DBA (doing business as), and LLC, or an S or C corporation. One such site is LegalZoom.com. For a fraction of what you would pay an attorney, LegalZoom and other services help you form and file your business structure from start to finish.

For more information, read the AllBusiness.com articles "S Corporations and Stock Ownership Issues," and "Creating the Articles of Incorporation for a Corporation."

Find the right legal business structure for your new or existing business at AllBusiness.com.

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