Learn the pros and cons of the 5 different business types to find the one that's right for you.
Better for max flexibility in how you manage and run your business; board of directors not required
Unlimited owners (aka "members") allowed
You're not personally on the hook for business liabilities
Taxed once or twice; you're free to choose which can help minimize taxes
Ongoing filings and fees to stay in compliance
LLCs can't go public
Not recognized globally; you may be taxed as a corporation in other countries
You're not personally on the hook for business liabilities
Taxed once—only shareholders pay on profits received
Ongoing filings and fees to stay in compliance
Less management flexibility; must have a board of directors
More admin; strict rules about holding meetings and keeping records
All shareholders must be U.S. citizens or residents
You're not personally on the hook for business liabilities
Taxed twice—business pays at the corporate level, and shareholders pay on income received
Ongoing filings and fees to stay in compliance
Less management flexibility; must have a board of directors
More admin; strict rules about holding meetings and keeping records
Best if you're supporting a good cause and want to protect your personal assets
No owners; you can start or oversee a nonprofit, but you can't technically own it
Looks more official to potential donors
Gives you access to public and private grants
You're not personally on the hook for business liabilities
Tax exempt—if you have 501(c)(3) status with the IRS
Ongoing filings and fees to stay in compliance
Less management flexibility; must have a board of directors
More admin; strict rules about holding meetings and keeping records
Pricier application and filing fees if you try for 501(c)(3) tax-exempt status
You're personally on the hook for business liabilities
Taxed once—you pay on profits in your personal tax return
Less hassle; separate tax return not needed
No personal liability protection
How it's unique
Board of directors not required
Unlimited owners (aka "members") allowed
Protections & taxation
You're not personally on the hook for business liabilities
Taxed once or twice; you're free to choose which can help minimize taxes
Drawbacks to consider
Ongoing filings and fees to stay in compliance
LLCs can't go public
Not recognized globally; you may be taxed as a corporation in other countries
Get StartedHow it's unique
100 shareholders max
Owners can only get common stock
Protections & taxation
You're not personally on the hook for business liabilities
Taxed once—only shareholders pay on profits received
Drawbacks to consider
Ongoing filings and fees to stay in compliance
Less management flexibility; must have a board of directors
More admin; strict rules about holding meetings and keeping records
All shareholders must be U.S. citizens or residents
Get StartedHow it's unique
Can issue shares to founders, employees, and investors
Unlimited owners (aka "shareholders") allowed
Owners may get preferred stock
Recognized internationally
Preferred by investors
Protections & taxation
You're not personally on the hook for business liabilities
Taxed twice—business pays at the corporate level, and shareholders pay on income received
Drawbacks to consider
Ongoing filings and fees to stay in compliance
Less management flexibility; must have a board of directors
More admin; strict rules about holding meetings and keeping records
Get StartedHow it's unique
No owners; you can start or oversee a nonprofit, but you can't technically own it
Looks more official to potential donors
Gives you access to public and private grants
Protections & taxation
You're not personally on the hook for business liabilities
Tax exempt—if you have 501(c)(3) status with the IRS
Drawbacks to consider
Ongoing filings and fees to stay in compliance
Less management flexibility; must have a board of directors
More admin; strict rules about holding meetings and keeping records
Pricier application and filing fees if you try for 501(c)(3) tax-exempt status
Get StartedHow it's unique
No paperwork to start; you may still need a DBA or business licenses to operate legally
One owner max
Protections & taxation
You're personally on the hook for business liabilities
Taxed once—you pay on profits in your personal tax return
Less hassle; separate tax return not needed
Drawbacks to consider
No personal liability protection
Learn moreNo, but you might want to. Forming an LLC, a corporation, or a nonprofit protects your personal assets and may unlock tax benefits.
Personal liability protection. An LLC protects owners from being personally on the hook for business liabilities or debts. A sole proprietorship doesn't.
Both protect owners so they're not personally on the hook for business liabilities or debts. Key differences include how they're owned (LLCs have one or more individual members and corporations have shareholders) and maintained (corporations generally have more formal record-keeping and reporting requirements). Even though LLCs are considered easier to start and maintain, investors tend to prefer corporations. Learn more
Yes. This can be helpful for business owners who want the management flexibility of an LLC—but also want to minimize employment taxes on the profits they receive.
If you plan on using a business name that's different from your personal or official company name, you're required to get a DBA in most states or counties. Learn more
Depending on the nature of your business, and where it's located, you might need a license or permit to operate legally within your city, county and/or state.