Choose the Right Business Entity
The business structure you choose has a significant impact on the amount you’ll pay in taxes and your fiscal responsibilities. It’s crucial to understand the benefits and drawbacks of each business entity type to help protect your assets and make your startup more credible in the eyes of potential partners and investors. Our team will help you make the right selection right from the start to save you time and effort down the line. This way, you won’t have to spend money and effort trying to change the entity type after your business grows.
Types of Entities
Sole Proprietorship
A sole proprietorship is owned and operated by a single individual who is responsible for all liabilities. You’ll also place all expenses and income from the enterprise on your income tax return.
Partnership
In a partnership, owners run the business under a special agreement, with each partner accountable for the company’s losses and earnings. Each partner will report their share of the finances on their personal tax returns.
C Corporation
A C corporation makes the company liable for its losses and is legally independent of its owners. The owners must, however, follow regulations and formalities specific to a C-corp, and shareholders pay taxes on dividends and corporate profits.
S Corporation
This type of corporation passes losses, earnings, deductions, and credits to its owners. The liability protection and tax benefits for this entity type are often appealing to new startups.
Limited Liability Company
The IRS treats the company as a sole proprietor or a partnership depending on the number of owners/members. An LLC is responsible for the same tax obligations and liability protection as corporations and partnerships.
