Choosing the right business structure isn’t just a paperwork decision—it’s a strategic move that affects how much you pay in taxes, how you pay yourself, and how protected your personal assets are.
If you’ve been asking yourself, “what business structure should I choose?”—you’re in the right place. At King of Kings Firm, we guide entrepreneurs and small business owners through entity selection to make sure they start strong, stay compliant, and keep more of what they earn.
Let’s break down the most common business entities, who they’re right for, and what you should consider before filing.
🔗 SBA’s guide to choosing a business structure.
What Is a Business Structure?
A business structure (also called a business entity) is the legal framework under which your business operates. It determines your tax responsibilities, liability protection, and how you’re allowed to take profits.
The most common business structures are:
Sole Proprietorship
Partnership
Limited Liability Company (LLC)
S Corporation (S Corp)
C Corporation (C Corp)
Each has pros and cons depending on your business size, goals, and income level.
🔗 Investopedia’s overview of tax implications by business structure.
The 4 Most Common Business Entities (And How to Choose)
1. Sole Proprietorship
✅ Best for: Freelancers, consultants, side hustlers
❌ Watch out: No legal separation between you and your business
Easiest to start—no formal filing required
You report income on your personal tax return
You’re personally liable for business debts and lawsuits
💡 Tip: Many people start here and evolve into an LLC or S Corp later.
2. LLC (Limited Liability Company)
✅ Best for: Small business owners who want simplicity + legal protection
❌ Watch out: May still be taxed as a sole prop unless you elect otherwise
Offers liability protection for your personal assets
Flexible taxation—you can choose how you’re taxed
Still fairly easy to form and maintain
🧠 Pro Tip: You can form an LLC and later elect S Corp taxation for better tax treatment—more on that below.
3. S Corporation (S Corp)
✅ Best for: Business owners making $50K+ in profit who want to reduce self-employment taxes
❌ Watch out: Requires payroll setup and IRS election
Pass-through taxation (no double taxation like a C Corp)
You must pay yourself a “reasonable salary”
Requires quarterly payroll tax filings and compliance
💰 Tax Advantage: You avoid paying self-employment tax on distributions above your salary, which can result in thousands in savings.
4. C Corporation (C Corp)
✅ Best for: Startups seeking outside investment or businesses with plans to scale large
❌ Watch out: Subject to double taxation and corporate formalities
Separate legal entity from owners
Can issue stock and attract investors
Pays corporate tax on profits + you pay personal tax on dividends
This structure is less common for small business owners unless they’re preparing for venture capital or employee stock programs.
When to Consider a Holding Company
If you own multiple businesses, manage real estate properties, or want to separate liability across ventures, a holding company may be a smart option.
A holding company is a legal entity that owns other businesses or assets but doesn’t directly conduct operations.
Benefits of a Holding Company Structure:
Shields individual assets from liabilities of separate ventures
Makes it easier to transfer ownership or bring on partners
Adds an extra layer of asset protection
Offers strategic tax and estate planning advantages
💬 Example: A real estate investor might form a holding company to own multiple LLCs—each holding a separate rental property. This keeps liabilities isolated while streamlining ownership and control.
At King of Kings Firm, we regularly help clients structure and manage holding companies, especially in real estate and multi-entity business operations. If you’re scaling your assets, let’s talk about whether this structure is right for you.
Key Factors to Consider When Choosing a Business Structure
If you’re still unsure what business structure you should choose, ask yourself:
Do I need personal liability protection?
Will I have partners or investors?
What are my long-term business goals?
How much do I expect to earn annually?
Am I ready to handle payroll and compliance for an S Corp?
🧮 This is where a professional tax advisor can help. At King of Kings Firm, we help clients weigh the tax and legal implications before making their entity decision.
Real Example: Changing Structures for Tax Savings
Client Profile: A marketing consultant in Atlanta making $115,000/year as a sole proprietor. After reviewing her books, we recommended forming an LLC and electing S Corporation status.
Outcome:
Filed the IRS election (Form 2553)
Set up payroll for a reasonable salary
Took additional income as distributions
💡 Result: She saved over $8,200 in self-employment tax in the first year.
Final Thoughts
Choosing the right business structure is one of the most important financial decisions you’ll make as a business owner. It affects how you’re taxed, how protected you are, and how easy it is to scale.
If you’re asking “what business structure should I choose?”, now is the time to get expert guidance. At King of Kings Firm, we offer business formation, bookkeeping, and tax planning all under one roof—so your structure matches your goals.
📞 Schedule a free consultation and get set up the right way.
Frequently Asked Questions
An LLC is a legal structure. An S Corp is a tax election you can make as an LLC or corporation. Many LLCs elect S Corp status for tax savings once profits grow.
Yes. You can start as a sole proprietor or LLC and later elect S Corp status or reorganize entirely. A tax advisor can help you time this to minimize disruption.
It depends on your income level, how you pay yourself, and your deductions. For many small business owners, an LLC taxed as an S Corp offers the best balance of savings and simplicity.
