When an architect decides to hang a shingle, one of the first decisions on the table is deceptively simple: what type of business entity should the firm be? The answer touches your personal bank account, your tax bill, your ability to bring in partners, and how much paperwork lands on your desk every April.

The main options are sole proprietorship, general or limited partnership, limited liability company (LLC), S corporation, and C corporation. Each one creates a different mix of liability exposure, tax treatment, ownership flexibility, and administrative burden. A sole proprietorship is the simplest to set up, but your personal assets are fully exposed to business debts. A C corporation walls off personal liability but subjects profits to double taxation. An LLC sits somewhere in between, offering liability protection with pass-through tax treatment and fewer formalities.

For architecture firms specifically, the picture gets more complicated. Many states require a certificate of authorization or professional corporation structure, and some mandate that all shareholders or directors hold professional licenses. These requirements can limit which entity types are actually available to you.

On the ARE, entity comparison questions show up as scenarios where you need to evaluate trade-offs. You won't be asked to recite a definition. You'll be asked which structure best fits a firm's priorities around liability, taxes, growth, or succession. That's what this topic prepares you to do.