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First things first, in order to be a nonprofit you have to be serving the public in a certain way, and none of the profits can be allocated back to your friend who is opening up the business
He can pay himself a reasonable salary from the nonprofit, but that's it
The best legal entity for a small business is the S corp, because you limit the self employment taxes you are responsible for.
You pay yourself a reasonable salary, and that's where employment taxes are allocated. The rest of your profit is only subject to income tax
You can form an LLC and elect to be taxed as an S Corporation - so you would have the benefits of the ease of forming an LLC under state law, but the tax benefits of an S Corp
So I would either form an S Corp or form an LLC and elect to be taxed as an S Corp
It's important to file your taxes each year, even if you have no activity because there is a monthly penalty for not filing your S Corp return
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