Answer five quick questions about your business and see which legal structure — LLC, S-Corp, C-Corp, partnership, or sole proprietorship — may be the best starting point.
A few questions about owners, liability, taxes, and fundraising. Nothing is stored.
Your business structure shapes how you're taxed, whether your personal assets are protected, how much paperwork you carry, and how easily you can bring on investors. There's no single "best" entity — the right choice depends on your priorities. A few key trade-offs drive most decisions.
A sole proprietorship and a general partnership are simple and cheap, but they offer no separation between you and the business — your personal assets can be exposed to business debts and lawsuits. An LLC or corporation creates a legal "shield" between your personal finances and the business.
Pass-through entities (sole proprietorships, partnerships, LLCs, and S-corporations) report business profit on the owners' personal returns, avoiding a separate corporate tax. A C-corporation is taxed on its own profits, which can mean "double taxation" — but that structure is often expected by venture investors. Once a business is profitable, electing S-corporation tax treatment can reduce self-employment tax for some owners.
The number of owners and your plans to raise money matter. Investors and venture funds usually want to buy stock in a C-corporation. If you never plan to raise outside capital and want simplicity with protection, an LLC is often the flexible default.
It depends on your goals. An LLC is flexible, simple to run, and gives liability protection with pass-through taxes — a common default for small businesses. A corporation is often preferred when you plan to raise venture capital or issue stock. Many LLCs can also elect to be taxed as an S-corporation once profitable.
Pass-through means the business itself doesn't pay income tax. Instead, profits and losses "pass through" to the owners, who report them on their personal returns. Sole proprietorships, partnerships, LLCs, and S-corporations are pass-through. A standard C-corporation is not.
Often, yes. Many businesses start simple and convert as they grow — for example, an LLC electing S-corporation tax treatment, or converting to a C-corporation before a funding round. Conversions have legal and tax consequences, so plan them with an attorney and CPA.
Yes. Formation fees, ongoing requirements, franchise taxes, and the rules for each entity type vary by state. This tool gives a general direction; your state's specific rules and your tax picture should be confirmed with a professional.
This selector provides a general, simplified suggestion for educational purposes only. It is not legal or tax advice and does not reflect any specific state's laws. No attorney-client relationship is formed by using this tool.
FirmLift Interactive Tool · Demonstration