Sole proprietor
One person, low risk, testing an idea
- Protects you:
- No: your personal assets are exposed
- Tax:
- Profit on your own return, plus 15.3% self-employment tax
- To start:
- $0 with the state (a local license or DBA may cost a little)
Partnership
Two or more owners, low risk
- Protects you:
- No, for a general partnership
- Tax:
- Partnership return (Form 1065); each partner pays on their share
- To start:
- Often no state filing
LLC
Most small businesses
- Protects you:
- Yes, for business debts
- Tax:
- Same as a sole proprietor or partnership by default
- To start:
- $35–$500 to file, depending on the state, plus yearly fees in most states
LLC taxed as an S-corp
Profitable owners happy to run payroll
- Protects you:
- Same as the LLC
- Tax:
- Salary through payroll; profit above it skips self-employment tax
- To start:
- The LLC fee, plus payroll and a yearly Form 1120-S
C-corp
Raising venture capital or giving stock to many people
- Protects you:
- Yes
- Tax:
- 21% at the company, then tax again on dividends
- To start:
- State filing fee (not in our data yet), plus a separate return
Nonprofit
A mission funded by donations or grants
- Protects you:
- Yes; nobody owns it
- Tax:
- Generally no federal income tax once the IRS grants 501(c)(3)
- To start:
- State filing fee, plus $275 (Form 1023-EZ) or $600 (Form 1023)
By what you're starting
Most choices aren't permanent. Many owners start simple and add an LLC or an S-corp election as they grow.
- Side hustle →
You may not need to form anything yet. Check local license and DBA (assumed name) rules.
- Local business →
Restaurant, shop, car wash or salon: city or county licenses, sales tax if you sell taxable goods, and on-site customers add injury risk, so many owners form an LLC and carry insurance.
- Consulting or freelancing →
Licensed professions (law, medicine, accounting) may need a professional LLC or corporation.
- Online store →
Register for sales tax in your state before you sell taxable goods.
- Agency or services firm →
Client contracts bring risk, so look at business insurance as well as the structure.
- Real estate →
If the property has a mortgage, ask your lender before moving it into an LLC.
- Nonprofit or charity →
Nobody owns it, and it files a Form 990-series return each year.
General information, not legal or tax advice. Overview based on the SBA's guide to business structures and IRS rules; fees from our state data.