Sole Proprietorship vs LLC vs S Corp vs C Corp | Small Business Bookkeeper Help
When you’re starting a business, one of the first big decisions is choosing the right business structure. Your choice affects taxes, liability protection, and how you work with a bookkeeper.
As a small business bookkeeper, I often help clients who aren’t sure whether to be a sole proprietor, LLC, S Corp, or C Corp — so let’s break it down in simple terms.
1. Sole Proprietorship
What it is: The easiest and cheapest way to start. You and the business are the same legal entity.
Taxes: All business income is reported on your personal tax return. You’ll pay income tax and self-employment tax.
Liability: No legal separation — if your business owes money, your personal assets are at risk.
Best for: Freelancers, side hustles, or early-stage businesses testing an idea.
Bookkeeping Tip: Even if you’re a sole proprietor, using freelance bookkeeping services can help you track income and expenses for easier tax filing.
💡 Example: You do photography gigs and get paid directly — everything is reported on your personal taxes.
2. LLC (Limited Liability Company)
What it is: A separate legal entity that protects your personal assets from business debts.
Taxes: Profits pass through to your personal tax return (like a sole prop) unless you elect to be taxed as a corporation.
Liability: Your home, car, and personal accounts are protected from business liabilities.
Best for: Small businesses that want legal protection and flexibility.
Bookkeeping Tip: Many bookkeeper near me searches lead to LLC owners who want help staying compliant with state filings and tax deadlines.
💡 Example: You run an online store as an LLC — if the business is sued, your personal property is safe.
3. S Corporation (S Corp)
What it is: A tax classification you can choose for your LLC or corporation.
Taxes: Pass-through taxation, but you can split profits between a salary and dividends — potentially lowering self-employment taxes.
Liability: Same protection as an LLC or corporation.
Best for: Established businesses with steady profits looking to reduce taxes.
Bookkeeping Tip: S Corps require precise payroll and expense tracking. This is where small business bookkeeper help is crucial.
💡 Example: You own a marketing agency and pay yourself a set salary, taking extra profits as distributions.
4. C Corporation (C Corp)
What it is: A standard corporation, completely separate from its owners.
Taxes: Pays corporate taxes, and shareholders pay taxes again on dividends (double taxation).
Liability: Full protection for personal assets.
Best for: Startups raising investor money or businesses planning to go public.
Bookkeeping Tip: C Corps have more compliance requirements — using freelance bookkeeping services can keep your records audit-ready.
💡 Example: Companies like Apple, Amazon, and Microsoft are C Corps.
How to Choose the Right Structure
Sole Prop: Simple start, but no asset protection.
LLC: Flexible, offers legal protection, great for small businesses.
S Corp: Ideal for profitable businesses wanting tax savings.
C Corp: Best for large companies or those with investors.
Final Word from Your Bookkeeper
No matter which structure you choose, having professional bookkeeping help keeps your finances accurate, your taxes lower, and your stress levels in check.
If you’ve been searching for a bookkeeper near me, need small business bookkeeper help, or want freelance bookkeeping services you can trust — let’s talk.
📩 Contact me today to get your books in order so you can focus on growing your business.