Sole Proprietorships, Partnerships, LLCs, S-Corps and C-Corps

Choosing the wrong business structure (or choosing too late) can result in higher taxes, weak (or no) asset and liability protection, and excessive paperwork and expenses.

We can help you avoid these pitfalls, we will also discuss the differences between them so that you can decide which business structure is the best fit for your business needs and your personal situation. The following is for informational purposes only. You will want to seek professional help before making a final decision on starting or re-structuring your business.

There are five distinct business structure forms:

1) Sole Proprietorship 2) Partnership 3) Limited Liability Company [LLC]

4) S-Corporation         5) C-Corporation

The three most popular structures for small to medium-sized businesses are the Sole Proprietorship, the LLC [Limited Liability Company], and the S-Corp.

Maybe you've heard something about double taxation with C-Corporations, but you really do not know what this means or how it will affect you. Do you simply dismiss this option based on the formidable phrase, "double taxation," alone? You probably don’t know that you could actually pay fewer taxes with a C-Corp? You may also have heard something about the lack of liability protection as a sole proprietorship. But how can you be sure it would be less expensive and safer for you to incorporate than to remain a sole proprietor with an umbrella liability insurance policy?

LLCs, Partnerships, and S-Corps have some similarities, particularly when it comes to tax filing, and revenue distribution. But there are huge differences in taxation between an LLC and an S-Corp? The differences can be to your advantage or disadvantage, depending on how you structure your business. If you mess up in the beginning, then you might end up owing even more taxes instead of paying less. By the time you realize you have made a mistake by picking the wrong business structure, it could be too late. Re-registering and fixing the mistakes at a later time will be more expensive, will involve much more paperwork, many more headaches, and more legal fees than getting it right from the start would have cost you.

Forming a corporation, a partnership, or an LLC involves more than just legal protection and taxation.

There are many aspects to consider, and you need to know what questions to ask before you can even begin to look for answers, so read on and do not skip anything. Do not try to save a few minutes of your time now at the risk of making a mistake later. Get all facts straight before making a decision. The simplest business structure is a Sole Proprietorship. Most people who start their own business without doing anything to form a separate entity are called sole proprietors. This is, by far, the simplest business form. As such, you and your business are one same. In some few cases, a Sole Proprietorship may be the best option, but not always. 

The decision you make when choosing one business structure instead of another will have an effect on the future of your business. The decision you make will affect your ability to attract investors, transfer your business to someone else, sell it, or bring new people into the business (such as managers vs. partners vs. angel investors vs. stock holders). The structure you choose also affects your exit strategy.

Ideally, you want to decide your business structure before you start your business. If you are already open and operating your business, you need to decide on the business structure as soon as possible. Do not put this decision off until you get "big enough." And don't think it will be easy for you to change your business structure whenever you feel like it. Although you can always register a new company and transfer assets to that new entity, you cannot erase the past. Sometimes the past comes back to haunt you.

Choosing and setting up an appropriate business entity is a critical step in establishing the legal position, strength of the business, and the impact of taxation on the business and the business owners.

We can help you properly select and structure your business entity. And our fees are very attractive and affordable.