LLC, S-Corp, or Sole Proprietor? Choosing the Right Business Structure
Choosing a business structure is one of the first real decisions a new owner makes, and it shapes taxes, liability, and even how bookkeeping gets set up — worth getting right from the start rather than changing later.
Sole proprietorship: simplest, least protected
A sole proprietorship requires no formal registration and is the default if you do nothing else — but it offers no separation between personal and business liability, meaning personal assets are exposed if the business is sued or can't pay a debt.
LLC: liability protection with flexibility
An LLC separates personal and business liability while keeping tax filing relatively simple — by default, profits pass through to the owner's personal tax return, avoiding the double taxation of a traditional corporation.
S-corp election: a tax strategy, not a separate entity
An S-corp isn't a business structure on its own — it's a tax election an LLC or corporation can make once profits are consistent enough to justify running payroll for the owner, potentially reducing self-employment tax. It adds bookkeeping complexity, so it's usually not the right first move for a brand-new business.
The right structure depends on liability exposure, expected profit, and growth plans — it's worth a conversation with both an attorney and an accountant before filing anything.
Want books like this for your business?
Book a free 20-minute discovery call — no pressure, just a clear read on where your books stand.
Book a discovery call →