Which structure is right
for your business?

All business income flows directly to your personal return — Schedule C. You pay ordinary income tax plus self-employment tax (15.3%) on every dollar of net profit.

No payroll, no W-2, no corporate return. Simple — but expensive as income grows. There's no mechanism to split income or reduce SE tax without restructuring.

None. You and your business are legally indistinguishable. A lawsuit against the business is a lawsuit against you personally — your home, savings, and assets are all on the table.

For a one-person service operation with minimal risk this may be manageable, but any business with employees, physical locations, vehicles, or client-facing liability needs more protection.

The hardest structure to sell. There's no legal entity to transfer — buyers purchase assets only, not the business as a going concern. That limits your buyer pool and often depresses value.

If exit is on your horizon, transitioning to an LLC or S-Corp years before a sale is one of the most valuable moves you can make. The clock starts when you restructure.

Partnerships are pass-through entities — no entity-level tax. Income, deductions, and credits flow to each partner's personal return via a K-1.

Partners can share profits in any ratio agreed upon in the partnership agreement, which creates planning flexibility. General partners pay SE tax on their share; limited partners typically do not.

Depends heavily on the type. In a General Partnership, every partner is personally liable — including for each other's actions. One partner's mistake can expose everyone.

An LLP protects partners from each other's negligence. An LP protects limited partners as long as they remain passive. For most operating businesses, an LLC or S-Corp is cleaner.

Partnership interests can be sold, but the process is governed by the partnership agreement. Buy-sell provisions are critical — without them, a partner's death, divorce, or departure can create chaos.

For multi-owner businesses, structuring the exit of one partner without dissolving the business requires planning well in advance. This is where a CEPA-guided review adds real value.

By default, a single-member LLC is taxed as a sole prop (Schedule C) and a multi-member LLC as a partnership. But an LLC can elect to be taxed as an S-Corp — which is one of the most powerful tax moves available to a profitable small business owner.

As a pass-through by default, all income hits your personal return. The SE tax issue remains unless you make the S-Corp election.

Strong protection when properly maintained. The LLC creates a legal wall between your personal assets and business liabilities — lawsuits, debts, and judgments against the business stay with the business.

The key: you must maintain the separation. Commingling personal and business funds (the "corporate veil") is the most common mistake that destroys LLC protection.

LLCs are highly flexible for exit. Membership interests can be sold, gifted, or transferred. Buyers can acquire the entity itself (membership interest purchase) or just the assets — giving both parties negotiating room on deal structure.

For most blue-collar business owners, an LLC taxed as an S-Corp is the sweet spot: liability protection, tax efficiency, and a clean exit structure — all in one.

The S-Corp's primary advantage is SE tax savings. The owner pays themselves a "reasonable salary" via W-2 — SE tax only applies to that salary. Remaining profits are taken as distributions, which are not subject to SE tax.

At $150,000+ in net profit, this structure typically saves more in taxes than it costs to operate. Below ~$50,000 in profit, the added complexity may not be worth it.

Strong liability protection — same principle as the LLC. The corporation is a separate legal entity; personal assets are shielded from business liabilities when the corporate formalities are maintained.

Requires more formal record-keeping than an LLC: annual meetings, minutes, resolutions, and separation of finances. More structure = more protection, but also more maintenance.

The S-Corp is one of the most buyer-friendly exit structures. Buyers can choose between a stock sale (they buy your shares, inheriting the entity) or an asset sale. A Section 338(h)(10) election can give a buyer asset-sale tax treatment while you get stock-sale treatment — a powerful negotiating tool.

Built-in gains tax applies if you converted from a C-Corp — less of a concern for businesses that started as S-Corps.

The C-Corp is a separate taxpaying entity at a flat 21% corporate rate. When profits are distributed to shareholders as dividends, they're taxed again at the individual level — this is the infamous "double taxation."

However, retained earnings inside the C-Corp grow at the lower corporate rate, which can be advantageous for businesses that reinvest heavily. QSBS exclusion (Section 1202) can eliminate capital gains tax on exit for qualifying C-Corps.

Strongest liability protection of any structure — long-established legal precedent, well-understood by courts and creditors. The corporation is fully separate from its shareholders.

Requires the most rigorous maintenance: board meetings, minutes, bylaws, officer roles, and strict financial separation. The additional overhead is the price of the structure's strength.

The C-Corp is the preferred structure for private equity, institutional buyers, and IPO paths. It can have unlimited shareholders, multiple share classes, and preferred stock — all of which are essential for raising outside capital.

For a blue-collar business owner not pursuing PE or institutional investment, the C-Corp's complexity and double taxation usually make it the wrong choice. But if a PE rollup or ESOP is in the exit picture, it changes the calculus entirely.