Choosing the Right Business Structure for Tax Purposes

The business structure you choose has significant tax implications. Understanding the differences can help you select the structure that minimizes your tax burden and supports your business goals.

Sole Proprietorship

Simplest structure, but all income is subject to self-employment tax. Business income is reported on Schedule C of your personal tax return.

Partnership

Pass-through entity where profits and losses flow through to partners' personal tax returns. Partners pay self-employment tax on their share of profits.

LLC (Limited Liability Company)

Flexible structure that can be taxed as a sole proprietorship, partnership, S-Corp, or C-Corp depending on elections made. Provides liability protection with tax flexibility.

S-Corporation

Pass-through entity that can help reduce self-employment taxes. Owners can receive both salary (subject to payroll taxes) and distributions (not subject to self-employment tax).

C-Corporation

Separate tax entity with potential for lower tax rates (21% flat rate). However, profits are taxed at the corporate level and again when distributed as dividends (double taxation).

Factors to Consider

• Your expected business income


• Plans for growth and raising capital


• Liability protection needs


• Administrative complexity you're willing to handle


• Exit strategy

Our business tax advisors can help you evaluate your options and choose the structure that best fits your situation.