Home
Various Corporate Structures in the US today

Friday Finance: Corporate Structures

On our Friday Finance call in Spring, 2026, the idea of a corporate struction was discussed and debated among our family members. Because of the size and relative simplicity of our corporations, we focused mainly on Sole Proprietorships, LLC’s, S Corps and C Corps. That limitation makes sense since these about 90% of all corporate structures.

At the same meeting, since my daughter Kathleen is a musician, she asked about the creation of the “A Corp” in Colorado. Having no experience with A Corps, there was some spade work to do. And there is a separate Friday Finance: A Corps page on that unique to Colorado concept, which is worthy of deeper discussions the legislation passed by the pen of the Governor of Colorado, in the Rockies, but it has yet to gain traction in the rest of the country.

The other Friday Finance participants felt it was worthwhile to review all of the Corporate Structures out there, so that when we re-read books like Rich Dad, Poor Dad, by Robert Kiyosaki, we can place the appropriate business situation in the right context.

Below is a quick Large Languate Model summary of the Corporate Structures that I have taught for many years. The brevity of the description is a blessing, so that I don’t bore the Friday Finance crowd, with excesive limited color commentary from me. Each section has been outlined with: What it is; Best Suited for; Pros and Cons of these corporate types.

Features of a Sole Proprietorship

1. Sole Proprietorship

What it is

The simplest business form: one individual owns and operates the business personally. Sole Proprietorships also represent, by far, the largest number of companies in the country. Approximately 70-73% of all US companies are sole proprietorships.

Best suited for

  • Freelancers
  • Consultants
  • Small side businesses
  • Very low-risk operations

Pros

  • Extremely easy and inexpensive to start
  • Minimal paperwork
  • Income taxed once on personal return
  • Complete owner control

Cons

  • Unlimited personal liability
  • Harder to raise capital, after examining own wallet and money from friends and family …
  • Business ends upon owner’s death unless transferred
  • Self-employment taxes apply

2. General Partnership

What it is

Two or more people operate a business together without formal incorporation.

Best suited for

  • Professional collaborations
  • Small family businesses
  • Informal ventures

Pros

  • Simple setup
  • Shared management and capital
  • Pass-through taxation

Cons

  • Each partner personally liable for debts
  • One partner can legally bind others
  • Potential disputes
  • Self-employment taxes generally apply

3. Limited Partnership (LP)

What it is

A partnership with:

  • General partners (manage and bear liability)
  • Limited partners (investors with limited liability)

Best suited for

  • Real estate investment groups
  • Film or venture investment structures
  • Passive investor arrangements

Pros

  • Allows passive investors
  • Flexible profit allocation
  • Pass-through taxation: n.b. 96% of all US business tax returns in 2026 were pass-through entities

Cons

  • General partner has unlimited liability
  • More filing complexity
  • Investor protections depend on agreements

4. Limited Liability Partnership (LLP)

What it is

A partnership where partners receive liability protection from actions of other partners.

Best suited for

  • Law firms
  • Accounting firms
  • Professional services

Pros

  • Liability shield from other partners’ malpractice
  • Pass-through taxation
  • Shared management flexibility

Cons

  • Not available for all professions in all states
  • More regulatory requirements
  • Some personal liability may remain

5. C Corporation (“C Corp”)

What it is

The standard corporation under IRS Subchapter C. And while the number of companies in the US who choose to be C Corps is small (~5–6%), they generate a huge share of company investment, revenue, market capitalization, and employment,

Separate legal entity from owners.

Best suited for

  • Large companies
  • Venture-backed startups
  • Businesses planning IPOs
  • Companies needing multiple investor classes

Pros

  • Strong liability protection
  • Easier to raise capital
  • Unlimited shareholders
  • Multiple stock classes allowed
  • Perpetual existence
  • Attractive to institutional investors

Cons

  • Double taxation:
    • corporation pays taxes
    • shareholders taxed again on dividends
  • More formalities and compliance
  • More expensive administration

Famous examples

  • Apple Inc.
  • Microsoft Corporation
  • The Coca-Cola Company

6. S Corporation (“S Corp”)

What it is

A tax election under IRS Subchapter S. The number of companies that are S Corps is approimatetly ~12–15% of all corporations. Legally it is usually a corporation or LLC, but taxed differently. [1]

Best suited for

  • Small-to-medium operating businesses
  • Owner-operated firms
  • Businesses with steady profits

Pros

  • Pass-through taxation
  • Avoids corporate double taxation
  • Potential payroll tax savings
  • Liability protection

Cons

  • Strict IRS requirements:
    • ≤100 shareholders
    • U.S. citizens/residents generally required
    • One class of stock only
  • More IRS scrutiny on compensation
  • Less attractive to institutional investors

Often ideal for

  • Medical practices
  • Small agencies
  • Closely held businesses

7. B Corporation (“Benefit Corporation” / Certified B Corp)

Important distinction

There only a tiny fraction of the US corporations who choose to become Certified B Corps. There is another corporate structure listed below, known as Public Benefit Corporations (PBCs). These are often confused and have been separated (see #15 for PBCs below) for the purposes of this Friday Finance.

There are actually two related concepts that constitute a B Corp:

A. Benefit Corporation

A legal corporate form available in many states.

B. Certified B Corp

A private certification issued by the independent Laboratory, known as B Lab.

A company can be one (Benefit Corp), the other (Certified B Corp), or both.

Best suited for

  • Mission-driven companies
  • ESG-oriented firms
  • Social enterprises

Pros

  • Allows balancing profit with social/environmental goals
  • Appeals to socially conscious consumers and employees
  • Signals governance commitments

Cons

  • Additional reporting obligations
  • Certification process can be rigorous
  • Mission goals may complicate investor priorities

Examples

  • Patagonia
  • Ben & Jerry’s
Common types of limited liability companies

8. Limited Liability Company (LLC)

What it is

A hybrid structure combining:

  • liability protection of corporations
  • tax flexibility of partnerships

Best suited for

  • Small businesses
  • Real estate holdings
  • Family businesses
  • Flexible ownership arrangements

Pros

  • Liability protection
  • Flexible taxation:
    • sole proprietor
    • partnership
    • S corp
    • C corp
  • Fewer formalities
  • Flexible management structure

Cons

  • Self-employment taxes may apply
  • Some states impose extra LLC taxes/fees
  • Investors often prefer C corps
  • Rules vary by state

Extremely common today

The LLC has become the dominant entity choice for many small and medium businesses. Approximately 15–20% of all corporations in the US were created and are structured as LLCs.

9. Series LLC

What it is

An LLC with separate internal “series” compartments.

Each series can hold different assets and liabilities.

Best suited for

  • Real estate investors
  • Asset segregation
  • Multi-property holdings

Pros

  • Liability separation between series
  • Can reduce administrative duplication

Cons

  • Not recognized equally in all states; therefore, cross state line holdings can be challenging.
  • Legal uncertainty across jurisdictions
  • More complex accounting

10. Nonprofit Corporations – 501(c)3, etc.

What it is

Organizations formed for charitable, educational, religious, scientific, or public purposes fall under this designation. And while these entity types are small in the overall scheme of corporate structures (1–2% of all organizational entities), they have missions and funders who are passionate about their work and their inherent value to society.[2]

Best suited for

  • Charities
  • Schools
  • Museums
  • Foundations

Pros

  • Tax-exempt status possible
  • Eligible for grants/donations
  • Limited liability to founders

Cons

  • Extensive regulation
  • No equity ownership
  • Profits cannot benefit private individuals and must be invested back into the company

Examples

  • American Red Cross
  • Smithsonian Institution

11. Professional Corporation (PC)

What it is

Corporation for separately licensed professionals.

Best suited for

  • Doctors
  • Lawyers
  • Dentists
  • Architects

Pros

  • Liability protection for business debts
  • Professional branding
  • Tax planning opportunities

Cons

  • Cannot shield own malpractice
  • State-specific rules
  • Ownership restrictions

12. Professional Limited Liability Company (PLLC)

What it is

LLC version for licensed professionals in states that prohibit or curb normal LLCs for professions.

Best suited for

  • Medical groups
  • Legal practices
  • Accounting firms

Pros

  • Flexible taxation
  • Liability protection
  • Easier administration than corporations

Cons

  • State restrictions
  • Professional licensing oversight

13. Cooperative (“Co-op”)

What it is

Business owned and democratically controlled by members/users of the cooperative.

Best suited for

  • Agricultural groups
  • Food co-ops
  • Worker-owned businesses
  • Credit unions

Pros

  • Democratic governance
  • Shared economic benefit
  • Community orientation

Cons

  • Slower decision-making
  • Harder to raise traditional capital
  • Governance can become complex

14. Joint Venture (JV)

What it is

Temporary arrangement between two or more companies for a specific project.

Best suited for

  • Construction projects
  • International business expansion
  • Collaborative business development

Pros

  • Shared risk/resources
  • Strategic collaboration

Cons

  • Potential conflicts
  • Complex agreements
  • Limited duration

15. Public Benefit Corporation (PBC)

What it is

A PBC is a For-Profit Corporation, created under state law (e.g. Delaware), whose charter names a specific public benefit. Directors are legally required to balance shareholders’ financial interests, the interests of people materially affected by the company, and that stated benefit. The company must report to shareholders on its progress toward the benefit, typically every two years.

Best suited for

  • Mission-driven companies that plan to raise outside capital, from venture funding through an IPO, and want the mission to survive that public stock offering process
  • Founders who want legal cover to turn down a higher bid, or make other trade-offs against short-term profit, in favor of the corporate mission
  • Companies whose mission is central to the brand. Examples include Patagonia, Warby Parker, and Once Upon a Farm
  • Companies working on technology with large societal stakes, like Anthropic and OpenAI, that want governance beyond pure profit maximization
  • Businesses pursuing or holding B Corp certification, since B Lab requires a legal stakeholder commitment where one is available

Pros

  • Directors are legally protected when they weigh the mission alongside profit, which reduces shareholder-lawsuit risk in a sale or other major decision
  • The mission is written into the charter instead of depending on a contract or the goodwill of current leadership
  • Compatible with normal corporate financing: stock, options, venture rounds, and public listing
  • Signals commitment to customers, employees, and impact-focused investors
  • Easy to adopt: a new company incorporates as a PBC, or an existing one amends its charter (Veeva did this while already public)

Cons

  • Weak enforcement: generally only shareholders can sue, there’s no outside auditor, and courts give directors wide latitude
  • Can be reversed. In Delaware, PBCs can convert back to a regular corporation with charter amendment & shareholder vote
  • Reporting requirements are light and loosely defined (n.b. which leaves room for “purpose-washing”)
  • Some investors are wary that directors are less accountable for financial performance
  • Not available in every state, and rules differ by state
  • The vague “balancing” standard can make it unclear what directors owe to whom when interests conflict

The short version: a PBC is a legal form a company chooses under state law, while a B Corp is a certification a company earns from a private nonprofit. They’re often confused because the names sound alike and many companies have both; however, they work differently.

Tax Classifications vs Legal Structures

A major point of confusion: Legal entity ≠ tax classification

For example:

  • An LLC is a legal structure with limited liability protections
  • It may elect different tax classifications:
    • sole proprietor taxation
    • partnership taxation
    • S corp taxation
    • C corp taxation

This legal protection and general tax flexibility are two of the reasons why LLCs are so popular.

Quick Comparative Summary

StructureLiability ProtectionTaxationBest For
Sole ProprietorshipNoPass-throughSolo side businesses
PartnershipNo/PartialPass-throughMultiple owners
LLCYesFlexibleMost small businesses
S CorpYesPass-throughProfitable owner-operated firms
C CorpYesDouble taxationScalable/high-growth firms
B CorpYesDepends on entityMission-driven businesses
NonprofitYesTax-exempt possibleCharitable/public missions
LLPPartialPass-throughProfessional firms
LPMixedPass-throughInvestment structures

Typical “Best Choice” by Scenario

ScenarioOften Best Structure
Freelance consultantLLC or sole proprietorship
Real estate investorLLC or Series LLC
Startup seeking VC fundingC Corp (usually Delaware)
Family-owned operating businessS Corp or LLC
Law/accounting practiceLLP or PLLC
Mission-driven companyBenefit Corporation
Charity or foundationNonprofit corporation

One Important Reality

The “best” structure usually depends on the ultimate goals you have for your organization:

  • Tax goals
  • Liability exposure
  • Number/type of owners
  • Fundraising plans
  • State law
  • Exit strategy
  • Payroll/distribution strategy

That is why serious businesses usually consult with one or more of the following experts before starting your new corporate structure:

  • a CPA
  • a Business Attorney
  • Sometimes an Estate Planner

============================================================

References:

[1] “Subchapter S” is the term used in regards to how many times the individual or corporation are taxed. The Revenue Act of 1958, was designed to let small businesses choose a corporate structure without suffering the burden of double taxation (personal & corporate). The subchapter (S) was created by Congress in 1946, after a recommendation by the Department of Treasury. It was later pushed forward by President Eisenhower (1954). The IRS code designation was enacted by Congress in 1958 as part of the Technical Amendments Act of 1958 (often referred to alongside the Revenue Act of 1958), and codified under 26 U.S. Code § 1361 – 1379 of the Internal Revenue Code.

[2] Non-Profits are often called 501(c)3 entities. There has been misunderstanding by some non-profit employees that a company with “Not-For-Profit” in their name, mission statement or bylaws, is supposed to lose money (i.e. not make a profit). This is a serious mistake, for any company that does not make a profit will soon lose energy and go out of business. It is imperative, no matter the corporate structure, that the enterprise value it’s work, its product, its services and its ultimate value to society with profits, even if those dollars are simply plowed back into the organization for future growth. Without profits and growth the enterprise will not likely survive.