Understanding Business Structures

Business Types 101


LLC- Limited Liability Company is a business structure that offers limited liability protection and pass-through taxation.

LLC's do not require a board of directors

LLC's can be a single owner also known as "member" or unlimited owners/members.

LLC's provide protections from personal liability. 

Possible Drawbacks 

Ongoing filings and fees to stay in compliance.

LLC's can not go public.


S Corporation - A business structure with an IRS designation for corporations that pass their income, losses, deductions, and credits through to shareholders and thus avoid double taxation on corporate income.

Allowed 100 shareholders max.

Owners can only get common stock.

You're not personally on the hook for business liabilities. 

Taxed once - only shareholders pay on profits received.

Possible Drawbacks 

Ongoing filings and fees to stay in compliance.

Less Management flexibility; must have a board of directors.

More administrative requirements; strict rules about holding meetings and record keeping.

All shareholders must be U.S. citizens or residents.

C-Corporation - A business structure in which owners, or shareholders, are taxed separately from the entity.

Best if you plan to go public one day.

Allowed to issue shares to founders, employees, and investors.

Un-limited owners also known as "shareholders" are allowed.

Owners may get preferred stock.

Recognized internationally.

Preferred by investors.

You're not personally on the hook for business liabilities. 

Taxed twice-business pays at the corporate level, and shareholders pay on income received.

Possible Drawbacks

Ongoing filings and fees to stay in compliance.  

Less management flexibility; must have a board of directors.

Strict rules about holding meetings and keeping records.

A Nonprofit corporation is an organization formed to serve the public good, such as for charitable, religious, educational, or other public service reasons. 

Best if you're supporting a good cause and want to protect your personal assets.

No owners; you can start or oversee a nonprofit, but you can't technically own it. 

Looks more official to potential donors.

Gives you access to public and private grants. 

You're not personally on the hook for business liabilities.

Tax exempt - if you have 501(c)(3) status with the IRS.

Possible Drawbacks

Ongoing filings and fees to stay in compliance. 

Less management flexibility; must have board of directors. 

More administrative requirements; strict rules about holding meetings and record keeping.

Pricier application and filing fees if you try for 501(c)(3) tax-exempt status. 

Sole Proprietorship -  A sole proprietor is someone who owns an unincorporated business by herself or himself. 

Easy set up 

No paperwork to start; you may still need a DBA or business licenses to operate legally. 

One owner max.

You're personally responsible for business liabilities.

Taxed once - you pay on profits in your personal tax return. 

Possible Drawbacks

No personal liability protection. 

If you would like to start your business structures contact us and schedule a consultation. 

(562) 230-2916

appointments@borboabusinessservices.com