Sole proprietorship, partnership, limited liability company, or a corporation ("C" Corporation or "S" Corporation) are the most widely used choices available. There are also other variations on these classifications. Tax, legal, and estate planning issues play a big role in your decision. Making the wrong choice can cost time and money. Each structure has a different legal and tax status that can be used to your advantage as follows:
A sole proprietorship is usually a small business with few, if any, employees. It is easy to form and there are few restrictions on the flexibility. Profits and losses flow through the proprietor and are reported on his or her personal form 1040 income tax return. There is generally no protection for the sole proprietor against legal liability for the proprietor's actions or inactions.