Business entity types explained—LLC, S-Corp, Sole Proprietor and more
✅ Why This Decision Matters
Choosing the right business structure isn’t just a legal formality — it’s a strategic financial decision. The entity type you choose directly impacts your:
🔹 Tax obligations
🔹 Personal liability
🔹 Ability to raise capital
🔹 Administrative requirements
At Robin Hood Tax Services, we specialize in helping entrepreneurs, content creators, and small business owners navigate the legal and tax implications of each business type.
👉 Book your free consultation today.
🧍♂️ 1. Sole Proprietorship
Advantages:
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You are your own boss
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Easiest and cheapest to form
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Income is reported directly on your personal tax return (IRS Form 1040)
Disadvantages:
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You are personally liable for all debts and taxes
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Hard to raise capital
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No legal separation between you and your business
👉 Do I Need an EIN as a Sole Proprietor?
👥 2. Partnership
Advantages:
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Shared capital and workload
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Simple to establish
Disadvantages:
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Partners are personally liable for business debts
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Requires a formal partnership agreement
👉 Explore Business Formation Packages
⚖️ 3. Limited Liability Partnership (LLP)
Advantages:
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Limited personal liability
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Flexible profit-sharing
Disadvantages:
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At least one general partner may hold liability
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Not available in all states
👉 Check your state’s rules here (IRS)
🛡️ 4. Limited Liability Company (LLC)
Advantages:
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Personal asset protection
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Can choose how to be taxed
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Great for online businesses, creators, and e-commerce sellers
Disadvantages:
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Subject to annual state fees
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May face double taxation if not elected as pass-through entity
👉 Start Your LLC Now
👉 IRS LLC Classification Rules
🏛️ 5. C Corporation
Advantages:
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Easier to raise capital
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Attractive to investors and VCs
Disadvantages:
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Double taxation (corporate income and shareholder dividends)
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Complex structure and more regulations
🧾 6. S Corporation
Advantages:
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Avoids double taxation
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Pass-through taxation
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Limited liability protection
Disadvantages:
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Strict eligibility (U.S. citizens/residents only, max 100 shareholders)
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IRS compliance and reporting burden
👉 Form an S-Corp with Robin Hood
👉 IRS Reference – S Corporations
📌 Summary Table
| Entity Type | Personal Liability | Tax Flexibility | Funding Options | Complexity |
|---|---|---|---|---|
| Sole Proprietorship | ❌ High | ✅ Simple | ❌ Limited | ✅ Easy |
| Partnership | ❌ High | ✅ Simple | ✅ Moderate | ✅ Easy |
| LLP | ✅ Limited | ✅ Moderate | ✅ Moderate | ❌ Medium |
| LLC | ✅ Limited | ✅ Flexible | ✅ Good | ✅ Medium |
| C Corporation | ✅ Limited | ❌ Double Tax | ✅ Best | ❌ High |
| S Corporation | ✅ Limited | ✅ Tax-Saving | ✅ Good | ❌ High |
🎯 Final Thoughts: What’s Right for You?
At Robin Hood Tax Services, we walk you through every step of entity selection — from:
We’ve got your back with expert guidance tailored to your business goals.