Are you thinking to become a freelancer or self-employed?
Are you considering to start a new business?
If you are one of above, I am so excited to start a journey with you about your business.
Are you ready?
Let’s start our exploration!
Before you start your business, you have to decide which business entity type you should choose.
It is not only choose what you want but also the one which is most suitable for you.
Before you choose one, I recommend you do self-evaluations to build the right picture for your future business.

What to Consider Before Jumping in to a Business
Following we will inspect some factors to determine which business structure is possible for you.
❶ Personality
This is to evaluate owning a business by yourself or with someone else.
Are you independent or dependent?
How would you like to control the business? Control by yourself or find a partner who has the same future vision as you?
What is your risk tolerance?
❷ Current Situations
Current Situations determine where to start.
Do you have a plenty amount of fund?
Just remain an emergency reserve fund for your mortgage and monthly costs?
Need other portions of capital?
❸ Business Goals within 1-5 years?
Expect for fast growth or stable growth?
Plan for public fund raising or just share the capital with the partner?
Aim at becoming a public traded company in the future?
❹ Tax Preferences
How would you like to be taxed?
Separate Taxation or pass-through taxation?
You want the company be taxed separately or together with you on your personal income tax return?
❺ Personal Liability
Will you need to sign a contract with your client?
Are you planning to hire employees?
Want to limit your personal liability related to the business debt?
After we finish above evaluation, let’s see which business structure is the most suitable for you.
4 Most Common Types of Business
❶ Sole Proprietorship
So called microbusiness. You are the only owner and enjoy the entire profits.
❙ Features of sole proprietorship
It is easy to set up.
This is the simplest choice and lowest cost to start your business.
No formation procedure required unless you would like to register a DBA.
You are automatically considered a sole proprietorship at the time you decided to be self-employed.
You can just start by preparing a laptop and work at the home.
In the sole proprietorship, the owners take unlimited responsibility of business debt.
❙ Who Should Start with Sole Proprietorship
Sole Proprietorship is a good choice for freelancers and one person companies.
Let’s see if you one of the following:
- You are in a full-time job and would like to do side hustle after work.
- You are a full-time worker on weekdays and a photographer on the weekends.
- You would like to test the water to see if being a freelancer is suitable for you.
- You would like to start your personal brand but do not find the position yet.
- You are still exploring your niche and testing the market.
- You just start your personal brand and already have your own product but do not have stable income.
❙ How is Sole Proprietorship Taxed?
The business profits are pass-through to you.
All the profits and losses will be reported Form 1040, Schedule C when you file the tax return.
As a sole proprietorship, you enjoy tax deductions that W-2 holders do not.
❷ Limited Liability Company
❙ Features of LLC
Limited Liability Company is a flexible choice for small business owners to decide how they would like to run their business.
It is hybrid structure combing partnership and corporation.
You can start with partnership and elect to be corporation later.
LLC is very popular among individual or partners who just launch their business.
LLC protects the owner’s personal assets and liability from business debt as corporation does.
❙ Members
LLC consists with one or more members.
Single Member LLC
If you register the company with only one member, it is Single Member LLC which is similar to Sole Proprietorship.
The difference is LLC will protect your personal assets and liabilities.
Also, LLC is more professional for your potential clients than sole proprietorship is.
Multi Member LLC
Two or more members will be Multi-Member LLC which is a formation of partnership.
❙ Who Needs LLC?
✦ Single Member LLC
You may consider Single Member LLC if you are independent and would like to control the whole ownership.
You are able to play multiple rules. You are the CEO, CFO, Sales Manager and accounting manager, etc.
If your are now sole proprietorship, you can start to prepare for being Single Member LLC if you are one of the following:
- You are required to sign a contract with your client. Just like a protective shelter, LLC will protect your personal assets and liabilities when you face lawsuits.
- You have confirmed your niche and done with market testing. Your products and services have met the needs for a group of people.
Also, you have to collect sales tax on your products. - Your business start to experience stable growth.
✦ Multi Member LLC
You would like to start a business with higher cost but have limited fund. You need a partner to share the investments.
For example:
You would like to launch a coffee shop. In the early stage, you need to find a store to pay the rent and do renovation. You also need prepare certain amount of funds to buy the machine. It will cost you a lot, not only the money but also the time. Therefore, you may want to find a partner to share the cost and workload with you.
To sum up, LLC is most suitable for the owner who just want to have a long last and stable small business.
❙ How is LLC Taxed?
✦ Single Member LLC
Just like Sole Proprietorship, all the profit and loss will be reported on your personal income tax return, form 1040 Schedule C.
✦ Multi Member LLC
You have to file Form 1065 partnership tax return at company level, and then pass the profit or loss through to personal income tax return for each partner according the ownership percentage.
❸ S Corporation
S Corporation is the most popular business types with small businesses who have been making progress steadily.
You are unable to register as a S Corporation directly. It has to be converted from other types of company ( from LLC or C Corporation ) by submitting form 2553.
❙ Features of S Corporation
S Corporation shareholders enjoy tax benefits. You don’t have to pay self-employment tax for your share of profit.
However, IRS know how we think. They still need shareholders to be responsible for self-employment tax by setting reasonable compensation.
Therefore, to avoid audit, the owner needs to be paid certain amount of wages (reasonable compensation) on the payroll.
❙ Who Can Switch to S Corporation?
LLC or C Corporation can submit form 2553 to elect to be S Corporation if:
- You originally set up a LLC and would like to switch to S Corporation to lower your tax.
- You are originally C Corporation and would like to avoid double taxation.
❙ How is S Corp Taxed?
S Corporation file Form 1120S corporation tax return. and pass though the profit or loss to all the shareholders, reporting on their personal income tax return.
❹ Corporation
C Corporation is an independent entity separated from the owner.
❙ Feature of C Corporation
C Corporation is subject to double taxation.
❙ Who Should Choose C Corporation
You have very clear objectives.
You are expecting both fast and stable growth.
You are ambitious to be a public traded company.
You would like to attract external investors and issue stock to raise capital.
If you are a LLC or S Corp now and have been making a big profit, you should consider switching to C Corp when your personal income tax rate is higher than corporation tax rate.
❙ How is C Corp Taxed?
Corporation itself report and pay tax on form 1120.
Stockholders who receive the distribution as dividend pay tax at personal level on their personal income tax.
Business Structure Development
To summarize for business structures, here is the most common development stages for small businesses:
- Stage 1. Sole Proprietorship: Looking for niche and testing the market.
- Stage 2. Limited Liability Company ( LLC ): Confirmed the niche and products
- Stage 3. S Corporation or C Corporation: The business has been operating and growing stably.
原本我開的是影音製作公司現在新增教學培訓這一塊,請問我需要另外再開一間公司還是可以新增營業項目?
基本上,只要你經營合法業務,美國對於公司營業項目沒有太多的限制。
1. 如果你新增的教學培訓也跟影音相關,就沒有太大的關係。
2. 如果你的教學培訓需要什麼執照或許可,只要另外再向州政府遞交相關資料即可。
以上,謝謝你的留言詢問~