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DBA
Name registration
"Doing Business As"
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Protection
None. A DBA is not a business entity. It is only a registered name. It provides no liability protection on its own. Whatever entity (or lack of entity) is behind the DBA determines your actual legal exposure.[18]
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Tax structure
A DBA has no tax treatment of its own. All income is reported under the underlying entity. For a sole proprietor operating under a DBA, that means Schedule C on your personal return, the same as operating without a DBA.[2]
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Who can use it
Any business entity (sole proprietors, partnerships, LLCs, and corporations) can register and operate under a DBA. Registration requirements vary by state and county.[18]
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Works well for
Any business that wants to operate under a name different from the owner's legal name or the entity's registered name (for example, "Jane Smith d/b/a Sunrise Bakery"). Sole proprietors commonly use a DBA to create a more professional or branded presence without forming a separate legal entity. See also: Sole Proprietorship row below for how these two options compare.
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Sole Proprietorship
1 owner
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Protection
None. You and the business are legally the same person. If the business is sued or can't pay its debts, your personal savings, home, and other assets are at risk.[1]
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Tax structure
All business profit is reported directly on your personal tax return using Schedule C.[2] There is no separate business tax return. You also pay self-employment tax (roughly 15.3%) on your net profit to cover Social Security and Medicare.[3]
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Who can own it
One person only. You cannot add a co-owner without converting to a different business structure.[1]
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Works well for
Freelancers, consultants, and very small businesses where the work carries low liability risk and startup simplicity matters most. Operating as a sole proprietor under your own legal name costs nothing and requires no registration in most states. Registering a DBA adds a small fee and filing requirement but lets you use a trade name.
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General Partnership
2+ owners
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Protection
None. Every partner is personally responsible for all business debts, including debts and mistakes made by the other partners, even without your knowledge or approval.[4]
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Tax structure
The partnership itself does not pay income tax.[5] Each partner reports their share of profit or loss on their own personal return. The partnership files an informational return (Form 1065)[6] and each partner receives a Schedule K-1 showing their share. Each partner also pays self-employment tax on their portion of the profit.[3]
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Who can own it
Two or more individuals or entities. A written partnership agreement is strongly recommended, though most states do not require one.[4]
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Works well for
Multi-owner businesses that want simplicity, though most attorneys recommend an LLC instead, because it offers the same flexibility with better personal liability protection.
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Limited Partnership (LP)
1 GP + 1+ LPs
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Protection
Split. The general partner manages the business and has unlimited personal liability. Limited partners are investors only; their personal risk is limited to the amount they invested, as long as they stay out of day-to-day management.[4]
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Tax structure
Same pass-through structure as a general partnership: Form 1065[6] and K-1s.[5] The general partner pays self-employment tax on their share.[3] Limited partners generally do not pay self-employment tax on passive income, though the rules on this are not fully settled in all situations.[7]
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Who can own it
Requires at least one general partner and one limited partner. Must be formally registered with the state. A written partnership agreement is essential.[4]
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Works well for
Businesses that want to bring in passive investors who provide money but don't run the company, such as real estate ventures or investment groups.
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LLC
1+ members
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Protection
Yes, if handled correctly. An LLC separates your personal assets from business debts and lawsuits.[8] This protection can be lost if you mix personal and business finances or fail to keep the business properly documented, so a separate bank account and basic records are important.
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Tax structure
By default, a single-member LLC reports income on Schedule C[9] and a multi-member LLC files Form 1065.[6] The LLC itself is not a separate federal tax category; it borrows its tax treatment from other structures under the IRS "check-the-box" rules.[10] An LLC can also elect to be taxed as an S corporation or C corporation, which can reduce self-employment taxes once the business is profitable enough to justify the added complexity.
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Who can own it
One or more individuals, corporations, or other LLCs. State rules vary, but LLCs are generally the most flexible ownership structure available.[8]
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Works well for
Most small businesses. Offers liability protection with relatively simple formation and flexible tax options. It is the most common choice for new small businesses today.
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S Corporation
1-100 shareholders
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Protection
Yes. Shareholders are not personally responsible for business debts or lawsuits, as long as the corporation follows required formalities (separate finances, required meetings, and proper record-keeping).[11]
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Tax structure
Profit passes through to shareholders and is not taxed at the corporate level.[12] The corporation files Form 1120-S[13] and issues K-1s to shareholders. The key advantage: owner-employees must pay themselves a reasonable salary (subject to payroll taxes), but any additional profit distributed beyond that salary is not subject to self-employment tax, which can mean meaningful savings for a profitable business.
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Who can own it
Maximum 100 shareholders.[14] Shareholders must be U.S. citizens or permanent residents; no foreign owners, and no other corporations as shareholders. Only one class of stock is allowed. S corporation status must be elected by filing Form 2553 with the IRS.[15]
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Works well for
Profitable small businesses where the owner wants to reduce self-employment taxes. Many LLCs elect S corporation tax treatment once revenue justifies the added payroll administration.
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C Corporation
Unlimited shareholders
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Protection
Yes. Shareholders are protected from the corporation's debts and legal claims, provided the corporation follows required formalities.[11]
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Tax structure
The corporation pays its own federal income tax at a flat 21% rate on profits[16] and files Form 1120.[17] If the corporation then pays dividends to shareholders, those dividends are taxed again on the shareholders' personal returns. This is called double taxation and is the main drawback for most small businesses. Profits kept inside the company and reinvested are only taxed at the corporate rate, which can be advantageous for businesses that reinvest heavily rather than distribute earnings.
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Who can own it
No limits on number or type of shareholders. Can issue multiple classes of stock (common and preferred). Foreign individuals and other companies can own shares.[11] This makes it the standard choice for businesses seeking venture capital or planning to issue stock broadly.
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Works well for
Businesses planning to raise outside investment, issue stock to employees, or eventually go public. Not typically the right fit for most small businesses due to double taxation and higher administrative costs.
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