Choosing
a structure.

What the SBA actually publishes

The Small Business Administration maintains a comparison of business structures. It is short, it is free, and it is a better starting point than most of what is written about this, mainly because it does not try to sell you a filing service. Read on 12 October 2026, it summarises each structure in two columns, liability and tax:

• Sole proprietorship, “Unlimited personal liability”. Self-employment tax and personal tax.
• Partnership, “Unlimited personal liability unless structured as a limited partnership”. Self-employment tax “except for limited partners”, and personal tax.
• Limited liability company, “Owners are not personally liable”. Self-employment tax, and “personal tax or corporate tax”.
• C corporation, “Owners are not personally liable”. Corporate tax.
• S corporation, “Owners are not personally liable”. Personal tax.

That table is useful for orientation and dangerous as a decision. Each of those liability cells is a single clause standing in for a body of state law, and the tax cells describe defaults that an election can change.

The two questions the table merges

Liability and tax are governed by different bodies of law and answered by different people. The liability column is state law. The tax column is mostly federal, and the federal half does not work the way the word “LLC” suggests. Federally, there is no such thing as LLC tax treatment.

Keeping them apart changes what you ask and who you ask. “Which structure pays less tax” is a question with a real answer that depends on your numbers. “Which structure protects me” is a question about state law and about how the business is actually run day to day, and the circumstances in which protection fails are precisely the ones worth paying somebody to explain.

Anyone who answers both questions with one word is answering neither.

“You can always change it later” is doing a lot of work

People often say you can always change your structure later, but the SBA gives a more cautious answer. A conversion may be restricted, may trigger tax, and can even cause the company to be dissolved unintentionally.

This is not an argument for agonising. It is an argument for spending one conversation with somebody qualified before filing, rather than treating the choice as freely reversible and discovering the terms of reversal later.

The S corporation is not a fifth kind of company

It appears in every comparison table as though it were, which is why it is so persistently misunderstood. An S corporation is a tax election that sits on top of an entity you have already formed. You do not start one instead of an LLC; you elect it for something that already exists.

Whether the election saves money depends on your business: its earnings, reasonable pay for the owner’s work, payroll costs, and state rules. There is no reliable one-size-fits-all answer.

What to take to the conversation

If you are going to pay for an hour of advice, these are the questions that make the hour worth it, because each has an answer specific to you that no website can supply:

• What does the liability protection in my state actually depend on, and what would cause it to fail?
• Which federal tax classification will I have by default, and is there a reason to elect a different one?
• If I later want to change structure, what does that cost here, in tax, in fees, and in risk to the entity?
• What do I have to keep doing every year to stay in good standing, and what happens if I miss it?

The SBA’s own closing advice is the unglamorous one: “Consulting with business counselors, attorneys, and accountants can prove helpful.”