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.
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