Choice of Business Entity

A common question:  What is the best legal entity?  I have a chart of the various types of legal entities (sole proprietorship, partnership, LLC and corporation) and their possible tax classifications.  From a legal perspective, an LLC is, in my opinion, the superior form of entity in Georgia.  (It likely is the superior form in most other states.)  An LLC with a single member is, absent action for it to be something else, a disregarded entity for federal tax purposes.  A multiple member LLC is, absent action for it to be something else, a partnership for tax purposes.  These classifications are, as a solid general rule, the best classifications.  (An LLP is virtually identical to an LLC with respect to the pertinent legal and tax considerations.)  An LLC provides limited liability protection for its members.  Sometimes, an S corporation is a superior form of entity.  This will potentially be true when there is one or more owners of a business who don’t do a lot of work and the business produces significant income.  However, an LLC can elect to be taxed as an S corporation.  A corporation cannot elect to be taxed as a partnership.