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Sole Proprietorship
Advantages: Ease of getting in and getting out. “I’m in business.” gets you in. “I’m done.” gets you out.
Disadvantages: Every net dollar in US Taxes is taxed twice (Social Security 15.3%) AND Federal Income Tax at whatever rate you’re at. This shouldn’t be a problem when you’re earning $12,000 a year. But at $90,000 you might want to limit that social security tax. Can’t limit it in a Sole Proprietorship which is reported on a schedule C.
C-Corporation
Every US corporation starts out under subchapter C of the Federal Tax Code. Corporations are incorporated in a state. You do not want to be a C-corporation. Too limiting, to structured. A C-corp is like a cardboard box. Income goes in, deductions go in. They are netted out and can only be pulled out by you as wages or (taxable) dividends. Too complicated, cumbersome and expensive to dissolve.
S-Corporation
Advantages: My Mom’s very favorite. You incorporate and IMMEDIATELY (same week) elect to be a Sub-Chapter S Corporation on a Form 2553. She says that this is really easy to do. The S-Corp lets you earn a wage as the sole shareholder and you can limit that wage. The rest just comes through as a distribution. In your personal return you are taxed on the wage and on the distribution. But the S-Corp is deducting your wage and 1/2 your social security costs. And the wage lets you pay your taxes as you go.
Disadvantages: What the clients don’t like is the hassle of payroll. But believe me, you would learn it in a day. Getting out of an S-Corp is cheap and easy. Almost as easy as leaving a Sole Proprietorship. No double taxation.
Limited Liability Corp
I just don’t see the point. Lots of American lawyers love this form but for taxes it’s a PIA. Partnership: no. Easy to get in, fraught with dangers, very expensive taxation and expensive to leave.