Compare structures
Which business structure is right for you?
Compare business types and find the right fit for your business.
Choosing the right business structure is one of the most important decisions you’ll make when starting or growing your company. The choice affects your taxes, your personal liability protection, and how easy it is to raise money or bring on partners.
But don’t worry, you don’t have to figure it out alone. Rocket Lawyer can help you explore your options, understand them, and file the paperwork when the time comes.
Compare how each type of business structure works
Explore the advantages and disadvantages of these entity types.
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LLC |
S-Corp |
C-Corp |
Nonprofit |
Sole proprietorship |
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Limited liability Registering your business with the state can protect business owners and shareholders from personal financial responsibility for business debts or liability. |
Members are protected. |
Shareholders are protected. |
Shareholders are protected. |
Directors and officers are generally protected when acting in good faith. |
— Sole proprietors are not protected. |
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Management flexibility Some entities are more rigid than others when it comes to structure. |
Variety of management structures. |
— Defined by state and federal law. |
— Defined by state and federal law. |
— Strict management laws. |
No management structure. |
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Favorable for financing Depending on your goals for financing and stock distribution, certain entity types may be more suitable. |
Gains credibility when applying for loans and grants. |
Can distribute one class of stock to up to 100 people. |
Can issue multiple classes of stock to unlimited shareholders. |
Gains credibility when applying for loans and grants. |
— Often more difficult to get loans and cannot issue stock. |
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Maintenance Compliance requirements vary by state and entity type. |
Easy to maintain and often most affordable. |
— Payroll requirements may create operational overhead. |
— Requires more complex accounting and potentially more reporting and fees. |
— Typically the most demanding due to tax-exempt status. |
Mostly no requirements or fees (some cities and counties do require business licenses or DBA filings). |
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Longevity Succession planning may be important to you. If so, you'll need a business structure that enables a smooth transition. |
With proper planning, LLCs can exist for generations. |
Existence is not tied to specific shareholders. |
Existence is not tied to specific shareholders. |
Existence is not tied to specific directors. |
— No longer exists when the owner quits or passes away. |
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Tax treatment Your choice of entity can impact your tax rate and filing options. |
Pass-through taxes: Members are taxed on their personal tax returns. |
Pass-through taxes: Shareholders are taxed on their personal tax returns. |
Corporate taxation: Income is taxed at the corporate level, then dividends are taxed at the personal level. |
Can apply for tax-exempt status, and donations are tax-deductible. |
Taxed only on the owner's personal tax return. |
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Registration fees State filing fees are required for all legal entities. As a Rocket Lawyer member, you only pay state fees. |
Fees are tax-deductible. |
Fees are tax-deductible. |
Fees are tax-deductible. |
Fees are tax-deductible. |
— No fees. |
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Can’t decide between two types of business structures? Explore our comparisons:
Ready to choose?
Once you know which business structure fits your needs, Rocket Lawyer can help you file the right documents quickly and correctly. That way, you can focus on growing your business while we handle the paperwork.
Start your business the right way with Rocket Lawyer.
At Rocket Lawyer, we follow a rigorous editorial policy to ensure every article is helpful, clear, and as accurate and up-to-date as possible. This page was created, edited and reviewed by trained editorial staff who specialize in translating complex legal topics into plain language, then reviewed by experienced Legal Pros—licensed attorneys and paralegals—to ensure legal accuracy.
Please note: This page offers general legal information, but not legal advice tailored for your specific legal situation. Rocket Lawyer Incorporated isn't a law firm or a substitute for one. For further information on this topic, you can Ask a Legal Pro.
Disclosures
- This page offers general legal information, not legal advice tailored for your specific legal situation. Rocket Lawyer Incorporated isn't a law firm or a substitute for one. For further information on this topic, you can Ask a Legal Pro.