Choosing your business entity is one of the most critical foundational decisions you will make. This checklist is an operational tool to help you compare the most common structures. It is not a substitute for professional legal or tax advice.

1. SOLE PROPRIETORSHIP AUDIT

The default, simplest structure. You and the business are legally the same.

• [ ] Liability Risk: I understand that as a Sole Proprietor, there is no legal separation between my personal assets (house, car, savings) and my business debts. If the business is sued, my personal assets are at risk.
• [ ] Tax Simplicity: I understand that taxes are simple. I report business income and losses on my personal tax return (Schedule C).
• [ ] Administrative Burden: I understand this is the easiest and cheapest entity to set up and maintain, often requiring no formal action to create.
• [ ] Best Fit Analysis: This structure is a potential fit for low-risk, small-scale initial operations or side hustles where personal liability is not a primary concern.

2. LIMITED LIABILITY COMPANY (LLC) AUDIT

A hybrid structure that separates your personal and business liabilities.

• [ ] Liability Protection: I understand that a properly maintained LLC creates a "corporate veil," separating my personal assets from business debts and lawsuits. This is its primary advantage.
• [ ] Tax Flexibility: I understand an LLC can choose how it is taxed. By default, a single-member LLC is taxed like a Sole Proprietorship. However, it can also elect to be taxed as an S-Corporation or C-Corporation, which can offer tax advantages at higher income levels.
• [ ] Administrative Burden: I understand an LLC requires formal state filing, a registered agent, and may require an annual report and fee. It has a higher administrative burden than a Sole Proprietorship.
• [ ] Best Fit Analysis: This structure is the standard for most professional service and online businesses as it provides the best balance of liability protection and operational simplicity.

3. S-CORPORATION (S-CORP) AUDIT

An election, not a separate entity. An LLC or C-Corp can elect to be taxed as an S-Corp.

• [ ] Primary Advantage (Payroll Tax): I understand the main benefit of an S-Corp election is the potential to save on self-employment taxes. The owner can be paid a "reasonable salary" (subject to payroll taxes) and take remaining profits as distributions (not subject to payroll taxes).
• [ ] Increased Complexity: I understand that running an S-Corp requires formal payroll processing, stricter bookkeeping, and more complex tax filing, which often requires an accountant.