Regardless of the type of business you want to start, your choice of organization type can have a significant impact on both legal and tax issues. The most common organization types are the following:

Partnership - There are several sub-types of partnerships, including those for professional organizations. The most typical defining feature is the share of every aspect of a business, including both profits and losses. Further, partnerships generally offer the least protection to an owner's personal property.

Sole Proprietorship - Perhaps the most common organization type, in a sole proprietorship you are the only owner and the organization is disregarded for tax purposes, meaning that organization income is treated as your income. Though you still require the appropriate licenses and permits, the organizational requirements are minimal. If you want to do business under a certain name, often you will also need a "DBA" (Doing Business As) registration.

C Corporation (C-Corp) - C-Corps are owned by shareholders. A C-Corp is an independent legal entity, meaning that the entity itself is held liable for debts and legal penalties, not the shareholders. C-Corps are generally the most complex organization type and should be utilized with care. C-Corps often have extensive administration and tax requirements. For these reasons, most C-Corps tend to be large and established businesses. C-Corps can be either publicly or privately owned. Public trading of shares carries additional requirements and complications.

S Corporation (S-Corp) - An S-Corp is not terribly different from a C-Corp save for one major difference, tax treatment. To organize as an S-Corp, you generally begin a business as a C-Corp. The S-Corp distinction comes into play when you designate your business as such on the appropriate tax form. This designation, often called the "check-the-box" designation, allows many organizational types the option of fulfilling their tax obligations as a different entity type.

Cooperative (Co-op) - A cooperative is a business or organization owned by and operated for the benefit of those using its services. Profits and earnings generated by the cooperative are distributed among the members, also known as user-owners. Typically, an elected board of directors and officers run the cooperative while regular members have voting power to control the direction of the cooperative. Members can become part of the cooperative by purchasing shares, though the amount of shares they hold does not affect the weight of their vote. Cooperatives are common in the healthcare, retail, agriculture, housing, art, and restaurant industries and rare in other areas.

Limited Liability Company (LLC) - Perhaps the most popular formal organization type, an LLC is a hybrid type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. An LLC's owners are referred to as "members." Depending on the state, the members can consist of a single individual (one owner), two or more individuals, corporations or other LLCs. Unlike shareholders in a corporation, LLCs are not taxed as a separate business entity by default. Instead, all profits and losses are "passed through" the business to each member of the LLC. LLC members report profits and losses on their personal federal tax returns, just like the owners of a partnership or sole proprietorship would.