Business Types 101
Learn the pros and cons of the 5 different business types to find the one that's right for you.​
Business type
LLC
S corporation
C corporation
Nonprofit
How it's unique
Better for max flexibility in how you manage and run your business; board of directors not required
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Unlimited owners (aka"members") allowed
Better for smaller corporations
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100 shareholders max
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Owners can only get common stock
Best if you plan to go public one day; can issue shares to founders, employees, and investors
Unlimited owners
(aka "shareholders") allowed
Owners may get preferred stock
Recognized internationally
Preferred by investors
Best if you're supporting a good cause and want to protect your personal assets
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No owners; you can start or oversee a nonprofit, but you can't technically own it
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Looks more official to potential donors
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Gives you access to public and private grants
Protections & taxation
You're not personally on the hook for business liabilities
Taxed once or twice; you're free to choose which can help minimize taxes
You're not personally on the hook for business liabilities
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Taxed once—only shareholders pay on profits received
You're not personally on the hook for business liabilities
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Taxed twice—business pays at the corporate level, and shareholders pay on income received
You're not personally on the hook for business liabilities
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Tax exempt—if you have 501(c)(3) status with the IRS
Drawbacks to consider
Ongoing filings and fees to stay in compliance
LLCs can't go public
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Not recognized globally; you may be taxed as a corporation in other countries
Ongoing filings and fees to stay in compliance
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Less management flexibility; must have a board of directors
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More admin; strict rules about holding meetings and keeping records
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All shareholders must be U.S. citizens or residents
Ongoing filings and fees to stay in compliance
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Less management flexibility; must have a board of directors
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More admin; strict rules about holding meetings and keeping records
Ongoing filings and fees to stay in compliance
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Less management flexibility; must have a board of directors
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More admin; strict rules about holding meetings and keeping records
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Pricier application and filing fees if you try for 501(c)(3) tax-exempt status