WHETHER SETTING UP YOUR BUSINESS as a sole proprietorship, partnership, limited liability company (LLC), S-Corporation, or C-Corporation, it is vital to understand, not only the filing and paperwork requirements, but also the different tax implications that are present with each type of business structure. 
Commonly, owner-operated small businesses are set up as sole proprietorships due to the simplicity of the filings and regulation, as well as the single-layer tax impact on the revenues of the business.  This type of ownership also allows the owner to be his or her own boss.  However, owners should be extremely cautious when dealing as a sole proprietor or in a general partnership.  These two types of business structures allow for all of the liabilities of the business to be shared with the individual owners on a personal level.  As such, unlimited liability can be scary.  Just remember to hope for the best but plan for the worst.  Don’t choose a business structure based on the ease and convenience of setting it up.  It is more common than one would think to have business situations end in lawsuits resulting in general partners and sole proprietors being sued personally and losing homes, cars and savings accounts.  There are plenty of hurdles that these types of business owners have to overcome.  Management can be difficult with limited participants and there is commonly a very overwhelming time commitment associated with this type of business. 
There are two types of members in a partnership: a general partner and a limited partner.  General partners have unlimited liability and they are typically managers of the company.  Limited partners have exactly what you would think: limited liability.  They, also, usually do not have a role managing the company.  Just remember, no matter how well the individual partners get along, one of the most common issues with partnerships is the disagreements that arise between members.  This sometimes leads to unfortunate falling-outs between friends. 
Most successful types of businesses are corporations—either limited liability companies, conventional corporations (C-Corps), or S-Corporations.  These three forms of business ownership comprise approximately 80% of all sales in the United States and they all share two major benefits; the first being that they have limited liability, and the second, they usually qualify for special tax advantages that other types of business ownerships do not.  Incorporating a business is a great strategy as it allows for the company to grow, it has perpetual life, ownership can change hands easily, and it’s common for corporations to be able to afford talented employees.  However, as a sword can cut both ways, there are some disadvantages to incorporating a business.  Corporations are more costly to start, they require more paperwork, possible conflicts with other owners and board members can arise, and they are also affected by double taxation, which means that the business’ profits will be taxed, as well as the shareholders’ dividends. 
A special type of incorporation is called an S-Corporation.  Aside from sharing the benefit of limited liability, this type of corporation has a major difference from a conventional C-Corporation:  It has much simpler taxes, called ‘single taxation,’ that are similar to that of a partnership.  Downsides of incorporating as an S-Corporation include ineligibility for a dividends received deduction, and that S-Corps are not subject to the 10% of taxable income limitation that are applicable to charitable contribution deductions.
Choosing the best type of business is a personal choice, albeit one that shouldn’t be taken lightly.  The prospected longevity, growth and future development of the business should be taken into serious consideration before the choice to incorporate is made.