Sole Proprietorship:
Operating as a sole proprietorship allows first-time or retiring entrepreneurs to skip formal business registration and setup processes entirely. This saves both time and avoiding introducing any complex legal or tax considerations when getting started. Sole props can simply start advertising services, connect with customers, invoice payments, and track income/expenses easily without paperwork delays. All earnings get reported through the owner's personal tax return annually (Schedule C form) making tax prep straightforward too - business profits/losses appear as personal income for the owner.

The biggest downside is the lack of legal business entity means sole proprietors have unlimited liability risks. The owner's personal assets like homes, cars, or personal bank accounts have no corporate shield protection if the business itself faces a lawsuit or bankruptcy. Many new entrepreneurs consider this acceptable when initially testing out a business idea before pursuing expanded growth however.

Single Member LLC:
Establishing a single member limited liability company (SMLLC) registered with one's state introduces important legal distinctions between business and personal finances. Like a sole proprietorship, the single LLC owner retains full control over decisions and oversees all operations. However forming an LLC requires drafting an operating agreement, documenting annual member meetings, submitting yearly reports/fees, and meeting various state compliance criteria. The upside is SMLLC status helps protect the member's personal assets like real estate property, vehicles, or personal savings accounts if the company itself faces legal problems or debt through the corporate veil protections now in place. The owner would not be personally liable in most cases. This can provide important peace of mind despite increased administrative workload and legal/tax considerations that accompany LLC establishment.

Learn more about different business structures in detail with our Types of Business overview.

General Partnership:
Forming a partnership means two or more co-owners agree to share ownership percentages, split profits, and make operating decisions together for a jointly run business. Most only draft informal agreements but best practice is formalizing details like ownership stakes, pay distributions, voting rights, dispute resolutions, partner changes/exits. This provides helpful clarity for all involved. Potential downsides are joint/several liability exposures - meaning personal assets still risk seizure if business sued depending on state laws.

Multi-Member LLC:
Establishing a multi-member LLC brings expanded documentation requirements like drafting Articles of Organization and formal operating agreements according to state statutes. However, it also limits owners' personal liability exposures through corporate veil protections now separating business/personal assets. The exact operations, maintenance, governance protocols must be followed to uphold status such as holding/recording annual member meetings. This shields partners from risks like lawsuits, debts, or bankruptcy claims - the LLC assumes responsibility as its own distinct legal entity.

Learn more about different business structures in detail with our Types of Business overview.

S Corporation:
S corporation election introduces substantial record-keeping needs like holding director/shareholder meetings, documenting major operating decisions, issuing share distribution ledger. However, in return owners can pay themselves reasonable salaries on which payroll taxes apply then take additional earnings as distributions only subject to standard income taxes. This avoidance of self-employment taxes on the full amount can add up significantly for profitable businesses. Downside is the administrative paperwork mentioned that comes with proper S-corp compliance.

S Corporation LLC:
Some states now allow legally forming an LLC then electing S corporation status with the IRS for tax purposes. This hybrid approach merges helpful elements like liability protections afforded to LLC partners with the sizable tax savings S-corp pass-through treatment creates. Compared to traditional S corps, compliance burdens can be less extensive as well under this structure. For profitable small businesses not seeking external investor ownership, the combined benefits can make this option advantageous long-term.

Learn more about different business structures in detail with our Types of Business overview.