Sole proprietorship

The default for an individual operating a business with no entity formation. Income on Schedule C, SE tax on Schedule SE. No liability protection. Simplest to start and operate. Good for very small or side-hustle businesses with low liability exposure.

Single-member LLC

A limited liability company with one owner. Tax-disregarded by default — taxed exactly like a sole proprietorship (Schedule C). Adds liability protection. Most freelancers and consultants form an LLC for liability protection without changing their tax filing.

Multi-member LLC / partnership

Multi-member LLCs default to partnership taxation (Form 1065). Each partner receives a Schedule K-1. Partners pay SE tax on their distributive share (with nuanced rules for limited partners and LLC members). Good for two or more owners who want flexibility in profit allocation.

S-corporation

A corporation (or LLC) that has elected S status pays no entity-level federal income tax. Pass-through taxation similar to a partnership, but the owner takes a W-2 salary (subject to FICA) plus distributions (NOT subject to FICA). The payroll tax savings on the distributions are the main reason small businesses elect S-corp once profits comfortably exceed a reasonable salary.

C-corporation

A corporation taxed at the entity level (21% federal flat rate). Dividends to shareholders are taxed again as income — the "double taxation" issue. C-corps make sense for businesses planning to raise venture capital, retain earnings for growth, offer broad fringe benefits, or qualify for Section 1202 small business stock. Generally NOT the right choice for a typical small business.

Where the IRS publishes guidance on this topic

The IRS publishes a layered set of free resources on most small-business tax topics: a relevant publication (usually one of Pub 334, 463, 535, 587, 946, 560, or 583), the instructions to the relevant form, the "Small Business and Self-Employed Tax Center" landing pages on IRS.gov, and the Audit Techniques Guides written for IRS examiners. Reading the agency's own materials is the cheapest tax education available. They are written in plain English, updated annually, and they reflect exactly the framework an examiner will apply if your return is selected.