Business structures aren't just for big corporations — freelancers, side-hustlers, and small business owners benefit enormously from choosing the right one.

Sole proprietorship: default for any self-employed income. No liability protection. All income taxed as self-employment (15.3% SE tax + income tax). Simplest structure but worst tax treatment and zero liability protection.

LLC (Limited Liability Company): liability protection (personal assets shielded from business debts). Taxed as pass-through by default (reported on personal return). Can elect S-Corp taxation for additional tax benefits.

S-Corp election: allows splitting income into "reasonable salary" (subject to SE tax) and "distributions" (not subject to SE tax). On $120K of self-employment income, paying yourself $70K salary and $50K distribution saves approximately $7,650 in self-employment tax annually. The IRS requires "reasonable compensation" — you can't pay yourself $1 salary and take $119K in distributions.

C-Corp: separate tax entity at 21% corporate rate. Useful when: retained earnings exceed personal needs (reinvesting in the business), qualifying for certain deductions unavailable to pass-throughs, or raising outside investment. Double taxation on distributions (corporate tax + personal dividend tax) makes C-Corps suboptimal for most small businesses that distribute all profits.