What Type of Business Should You Start? A Simple Guide to Business Structures

Starting your own business is exciting — but figuring out how to structure it can be a little confusing. Should you be an LLC? A sole proprietorship? What even is an S-Corp?

Don’t worry — you’re not alone. This guide will break down the most common business structures, including what they mean, the pros and cons, tax stuff, and when each one makes the most sense. We’ll keep it simple, honest, and real — just like we do at The Self Start.

1. Sole Proprietorship

What it is: The simplest and most common way to start a business. If you start working for yourself and haven’t filed paperwork, you’re likely a sole proprietor.

• Pros: Easy to start, low cost, full control, simple taxes
• Cons: No liability protection, harder to get funding, no business separation
• Taxes: Income and self-employment taxes filed on personal return
• Best for: Freelancers, side hustles, low-risk startups

2. Partnership

What it is: A business owned by two or more people. Can be a General Partnership (shared roles) or Limited Partnership (one active, one passive).

• Pros: Shared responsibility, easy setup, flexible structure
• Cons: Shared liability, personal risk, potential for disputes
• Taxes: Income passes through to each partner’s personal return
• Best for: Business partners or family businesses

3. Limited Liability Company (LLC)

What it is: A flexible legal structure offering liability protection with simple tax options. Very popular for small businesses.

• Pros: Personal protection, flexible taxation, professional image
• Cons: Filing fees, annual state paperwork, separation of finances required
• Taxes: Default is pass-through taxation; can elect S-Corp status
• Best for: Growing solo businesses or small teams

4. S Corporation (S-Corp)

What it is: A tax election that LLCs and corporations can choose to reduce self-employment tax.

• Pros: Potential tax savings, liability protection
• Cons: Must run payroll, more IRS rules, not ideal for low profits
• Taxes: Pay yourself a salary and take remaining profit as distributions (less taxed)
• Best for: Profitable LLCs or corporations ($50k+)

5. Corporation (C-Corp)

What it is: A full legal business entity that pays corporate taxes. Common among large and growing companies.

• Pros: Strong protection, investor-friendly, fixed 21% corporate tax
• Cons: Double taxation, expensive and complex to manage
• Taxes: Corporation pays taxes, owners pay again on dividends
• Best for: Startups, tech firms, investor-backed ventures

Quick Comparison Table

Final Thoughts

Choosing the right business structure is important, but don’t let it slow you down. Start small, then adjust as your business grows. Many entrepreneurs start as a sole proprietor or LLC, then upgrade to an S-Corp later on.

At The Self Start, we help regular people become real business owners — with simple tools, guides, and training courses made just for you.

Want more help? Download our Free Starter Pack or check out our full video courses here.