There's more to starting a business than coming up with a great idea, writing a business plan and finding financing. A would-be small-business owner also must decide how the business should be structured.

Until recently, most chose between sole proprietor, partnership and incorporation (including its small-business sibling, the S chapter corporation).

Now, though, more business owners are choosing to ago with another choice -- the limited liability company. An LLC offers more legal protection than a partnership, but retains the tax pass-through characteristics of a partnership.

Like the other choices, it has its pluses and minuses. Although individual circumstances will affect your decision, here's a scorecard for each that should help you plot your course.

LLCs
"Most people think that LLCs are probably the wave of the future, except for companies that eventually are interested in going public."

Advantages: LLCs, like corporations, provide business owners with liability protection. That is, debtors will go after company assets, not your personal assets. That's a step up from partnerships and sole proprietorships when your personal assets may be used to settle a business debt. Unlike corporations, LLCs don't suffer from double-taxation, in which the corporate entity is taxed and then its shareholders' dividends are taxed as well. This benefit applies to LLCs that are classified as partnerships for tax purposes. An LLC tax preparer simply checks a box on his or her federal return to indicate how the organization will be taxed. Some states' tax laws mirror the federal government's treatment of LLCs.

Earnings and losses pass through to the owners and are included on their personal tax returns. There's also less paperwork involved with running an LLC than a formal corporation: No year-end minutes, no notification of shareholders of meetings and so on,

Finally, LLCs are the most flexible when it comes to organization. For example, there are fewer rules regarding who can be a shareholder. They also tend to be more informally run than a regular corporation.

Disadvantages: Tax liability for an LLC varies by state. So if your company is going to operate in several different states, you'll have to know how they treat LLCs before electing to choose this type of corporate structure. An LLC also can't go public, so if you're the owner of a dot-com that envisions an initial public offering down the road, incorporation is a better route to take. Otherwise, you'll have to switch your company from being an LLC to being a corporation. That can add to the cost of your IPO.

The cost of launching an LLC also varies by state. Some states charge more for a LLC than to incorporate, some charge less and some charge the same rate regardless of what form of corporate structure that you choose. A few states even charge special annual fees for LLCs. Finally some states require two or more partners for an LLC so if you're going into business solo, this business format is not for you.

Incorporations
A new business can form a C corporation or an S corporation. The number of S corporations that are sprouting is actually surpassing the formation of C corporations in part because of the advantages inherent with S corporations. Most businesses just starting out will opt for the S classification.

Advantages: Unlike LLCs, both S corporations and C corporations can go public. For that reason, venture capital companies prefer to work with corporations rather than with LLCs. S corporations, like LLCs, don't suffer from double taxation. C corporations may face double taxation, but they can have incentive stock option plans.

Disadvantages of corporations: As mentioned previously, C corporations face double-taxation, but S corporations also have drawbacks. Their chief disadvantage is that the number of shareholders that an S corporation can have is capped at 35, In addition, there are limitations on who can be a shareholder in an S corporation. S corporations can't have a corporation or a foreigner as a shareholder. Both S and C corporations require more ongoing paperwork than an LLC. They must file articles of incorporation, hold directors' and shareholders' meetings, keep corporate minutes and hold shareholder votes on major corporate decisions.