Choosing The Entity That Best Fits Your Business Needs...

are you in the process of deciding which business structure is best for your company perhaps you're looking to decide which entity is right for you and can't quite decide and have a few more questions well one question we often get from startup businesses is which entity should I choose an LLC an S corporation may be a c-corporation may be a sole proper or partnership if you asked a hundred different

business structuring professionals, which entity to form you'll likely get some percentage of them recommending each of the different entities for you to choose from if you talk to a tax professional or CPA you'll get the perspective of how to set up at any based on your tax situation a bookkeeper may have a different viewpoint for ease of data entry talk to a lawyer and you'll probably get suggestions from the asset and liability protection side

of things talk to a financing expert and you'll hear what we'll provide the best opportunities for obtaining credit and capital talk to investors and they'll have a specific type of entity they will only invest in talk to a branding expert and they'll tell you which entity based on image and marketability of your company how do you know what's the right entity when getting all of these perspectives from different advisors well there really isn't a

wrong or a right answer there's only what meets your needs the best collectively so ask yourself a few questions to get started in deciding which entity is right for you first do you want something easy to set up do you want something with little paperwork to maintain annually are you looking for asset and liability protection from lawsuits or judgments do you want to raise capital for the company or separate your business and personal credit

would you like to lower your risk of IRS audit or look at increased tax benefits well based on the importance you place on each of these areas that will determine the type of entity that you want to consider setting up let's start with the sole proprietorship and general partnership if you're considering a sole proprietorship or general partnership it may be easy may not require a lot of paperwork to set up and it provides

some type of tax benefits as well however there is no liability or asset protection they have high audit rates with the IRS and no ability to raise capital or separate your personal and business credit based on that if you ruled out which many people do the sole proprietorship or general partnership then what we want to do is look at the S corporation C corporation or LLC and decide which one of these we want

to form the C corporation S corporation n LLC all are considered legal entities all enjoy certain protection under the law all have benefits as well that they share such as they help you safeguard personal assets from business activities they allow you to conduct business with limiting your personal liability if it's run properly they allow you to raise capital and allow you to separate your personal and business credit now some disadvantages that some people give

to these entities is that they can be a little more expensive to set up and have a little more paperwork but I ask compared to what compared to a lawsuit that drags in all your personal assets compared to having an IRS audit it's not nearly that expensive so all three have great benefits and are very similar in these areas so where are the differences and where do those differences occur well there's four areas

number one the tax status number two the types of deductions you're allowed to take number three how and who can own the entities and number four the amount of required paperwork for asset protection purposes so let's take a closer look at each of the three types of entities the S corporation C Corporation and LLC we'll start with the S corporation S corporations get their name from a unique section of the Internal Revenue Service code

S corporations are formed as C corporations and then you must file a form called a 25:53 with the IRS to elect to be taxed with S status s-corporation owners report their share of profit and loss in the company on their personal tax returns a corporation can eliminate the disadvantage of double taxation of corporate income and shareholder dividends by applying for the S corporation status and shareholder restrictions on S corporations include no more than 100

owners they must be US citizens or residents and they cannot be an LLC C corporation another S corporation a partnership or other certain types of trusts S corporations also need to hold annual meetings and record the meeting minutes now let's look at the C corporations C corporations are separate taxable entities they file a corporate tax return separate from your personal tax return they pay taxes at corporate level rates which differ from our individual tax rates

and C corporations face potential of double taxation where you are taxed on corporate profits and then if those corporate profits are distributed as shareholder dividends they're taxed a second time C corporations have no limit though in the number of shareholders or who those shareholders are most states require that you hold annual meetings and record meeting minutes certain deductions are allowed only for C corporations with certain fringe benefits for example certain types of health plans or retirement

plans can be detected in the C corporation that cannot be in an LLC or S corporation so now let's take a look at the LLC which is the limited liability company the LLC combines the tax flexibility of a partnership with the personal liability protection of a corporation you can choose how you want the LLC to be taxed as a sole proprietorship if want one owner or a partnership if multiple owners or as

a C corporation the default status is a partnership LLC owners report their share of business profit and loss on their personal tax returns similar to reporting for a general partnership or S corporation when you elect the partnership staff owners can report profit and loss on their individual tax returns if they've elected the partnership status as well there is no limit to the number of shareholders or who those shareholders are in most states they're not required to

hold annual meetings are required to have meeting minutes for asset protection purposes although it's still recommended from the viewpoint of taxes and raising capital as you can see all have benefits in the different types of entities so when you start to choose and decide which entity you want keep in mind the different perspectives that each of the different trusted advisors is going to provide for you in addition understand your business will go through several

stages of growth as you build your business over time you need to consider long-term strategy not just something that will meet your needs for today when you're deciding the type of business structure and as you carry your business to new levels of success and as you take time to write down your goals you may still have a few questions about which entity is best for you so go to our websites homepage and

select the business startup wizard to walk you through what thousands of others in your situation and area have done the wizard actually pulls together data from several years letting you know what others in your state and industry filed it's a great tool to help you decide which entity here's an example in this situation we looked up a business in the business services company in California and found that the majority of people formed an LLC

in California or about 35% of them 30% filed a corporation in California while 11% filed an LLC in Delaware and 6% in Nevada if you want more help walking through this wizard or to file your corporation online simply call toll-free 800 eight one eight six zero eight two or go to our home page incorporate com

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are you in the process of deciding which business structure is best for your company perhaps you're looking to decide which entity is right for you and can't quite decide and have a few more questions well one question we often get from startup businesses is which entity should I choose an LLC an S corporation may be a c-corporation may be a sole proper or partnersh...