Sole Proprietorship -If you decide to own the business directly, there is no need to set up a separate legal entity. If you prefer some liability protection, you can set up a wholly owned domestic limited liability company. A wholly owned LLC is disregarded under federal tax law.
Partnership -is an entity own by two or more person who join to operate a trade or business. The partnership is a flow through entity. It is not subject to income tax. The income, gain, loss and deduction flow through to the owners, who are liable for the tax consequences. IRS doesn’t allow the partner to be employees of partnership, so partners are subject to self-employment tax rule.
C Corporation -is legal entities formed under state law. C Corporation income subject to two levels of tax, once on the corporation’s net income, than again when the earnings are distributed as dividends.
S Corporation -is generally a flow-through entity that is subject to only one level of tax. Although S corporation are passthrough entities that are similar to partnerships, the rules applicable to S corporations are significantly different from those appliable to partnerships. A shareholder in an S corporation can be an employee of the S Corporation and is not subject to self-employee tax.
Section 199A provision in the 2017 tax law generally allows individuals to take a deduction of 20% business net income, subject to limitation. The deductible amount with respect to each QTB carried on by a taxpayer is limited to the less of (a) 20% of the taxpayer’s qualified business income, or (b) the greater of 50% of the W-2 wages or the sum of 25% of the W-2 wages plus 2.5% of the unadjusted basis of all qualified property used by the QTB. A Qualified Business Income of taxpayer is any trade or business other than a “specified service trade or business”, which includes health, law, accounting, actuarial, consulting and brokerage services.