Embark on your business journey
Incorporating your business¹ is an important step, and helps with everything from legal to tax considerations. To get started, choose how to incorporate your business based on how you'd like it to be structured.
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Sole Prop | LLC | S-corp | C-corp | |
|---|---|---|---|---|
Cost | Free | Starting from $245 | Starting from $245 | Starting from $245 |
Overview | Owned and operated by one individual. Simple setup, low cost. No separate legal entity is formed. Unlimited liability. Personal and business assets become “one” and both are potentially at risk with lawsuits. | LLCs (Limited Liability Company) are the most popular. They offer both the liability protection found in corporations and the tax benefits available to sole proprietors and partnerships. | An S Corporation, or S Corp, is a business structure that allows corporate income, deductions, and credits to pass through to shareholders, avoiding double taxation. S Corps require that shareholders be U.S. citizens or residents. S Corps offer limited liability protection to shareholders, safeguarding personal assets from business liabilities. | A C Corporation, often known as a C Corp, is a separate legal entity from its owners. This setup offers strong protection for shareholders' personal assets against business debts and liabilities. They are flexible in terms of the number and types of shareholders they can have, making them suitable for larger businesses and those seeking external investments. |
Number of Owners | 1 | An owner of an LLC is called a member, and there is no limit to how many members there can be. Members can be individuals or other corporations. Most states also allow there to be just a single owner. If the LLC opts for S-Corp taxation they can have more than 100 shareholders and have more complex IRS dependabilities. | S Corps have restrictions on ownership. They cannot have more than 100 shareholders. All shareholders must be U.S. citizens or residents. Certain types of entities, such as other corporations and partnerships, are generally not allowed to be shareholders. | Unlimited number of shareholders, and they can include both individuals and other entities. There are no restrictions on the types of shareholders. |
Management | The owner has total control of business operations and profits. Freelancers, consultants, and individual service providers often operate as sole proprietors. Example: | An LLC is owned by its members, who share profits based on their ownership percentage or as outlined in the Operating Agreement. Members can either run the LLC themselves, called “member-managed,” or opt for the LLC to be “manager-managed” and appoint managers to handle operations. Example: | S Corp shareholders own the company and have the right to vote on major decisions. However, shareholders in an S Corp have to be based in the U.S. and may have restrictions on the types. S Corps can have a board of directors or may choose to operate with a simpler management structure. S Corps have officers that can include CEO, CFO, etc., or opt for a more flexible management structure, especially if the company is small. In some cases, shareholders can take on both director and officer roles. Example: | Shareholders are the owners of the corporation and have the right to vote on major decisions affecting the company, such as electing directors. The board of directors is responsible for overseeing the corporation’s overall operations and making major decisions. Directors are elected by the shareholders, and they set strategic direction and appoint officers. Officers are appointed by the board of directors and are responsible for day-to-day management. Common officer roles include CEO, CFO, COO, etc. These roles may be held by a combination of individuals. Shareholders are the owners of the corporation and have the right to vote on major decisions affecting the company, such as electing directors. The board of directors is responsible for overseeing the corporation’s overall operations and making major decisions. Directors are elected by the shareholders, and they set strategic direction and appoint officers. Officers are appointed by the board of directors and are responsible for day-to-day management. Common officer roles include CEO, CFO, COO, etc. These roles may be held by a combination of individuals. In a C Corp, there is typically a clear hierarchy, with the board of directors providing high-level oversight, and officers managing the company’s daily operations. Example: |
Liability | Complete. Both personal and business assets are seen inclusively and are at risk | Limited. Members have no personal liability. | Limited. The members of the organization are protected from personal liability. | Shareholders of a C Corp generally have limited liability for the company's debts and liabilities. Their personal assets are protected from business-related obligations. |
Taxation | Profit or loss is passed through to the owner (only personal tax no business tax). | Two ways to set-up: 1. Profit or loss is passed through to the owner or partnership. 2. A special election is made to be taxed like a S-Corp or C-Corp. Helps reduce tax as the business grows. | Corporations are taxed as C Corp by default, but small businesses that are S Corporations can opt for pass-through taxation. | C Corporations are subject to double taxation. The corporation itself is taxed on its profits at the corporate income tax rate. If the corporation distributes dividends to shareholders, those dividends are also taxed on the shareholders' individual tax returns. |
Transfer of Ownership | No. Cannot be transferred or sold. | Yes | Yes | Yes |
Incorporate your business
Different states have different incorporation fees.
Sole Proprietorship
Limited Liability Company (LLC)
S Corporation
C Corporation
At no cost
Often chosen by individual service providers or small-scale local businesses, such as freelancers and local stores.
Good for smaller businesses with a few partners, including consulting, retail, and professional services like law firms.
Common in industries where personal services are provided, such as professional consulting and healthcare.
Used by larger companies, tech startups, those seeking significant outside investments, or planning to go public.
Benefits & things to consider:
You make all decisions
Keep all profits, pay all bills
Simple paperwork
Personally liable
Benefits & things to consider:
Personal protection from business debts
Share profits and decisions
Tax flexibility as pass-through entities
More paperwork (but not too much)
Benefits & things to consider:
Good for small to medium-sized businesses
Get a salary, save on taxes
More paperwork, more rules
Partners are all U.S. citizens
Benefits & things to consider:
Limited liability for business debts
Many owners from any country
More paperwork, more rules
Business pays own taxes
Please consult a CPA or tax advisor to confirm the right business formation for your situation.
Not sure what business type to choose?
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Frequently asked questions
When should you consider forming an LLC?
Who is eligible for forming an S corporation?
Who should think about forming a C corporation?
Can I change my business structure after incorporation?
Can I incorporate my business in a different state?
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