One of the most important decisions when starting a business is selecting an entity type. It is often challenging to determine if you should organize as a Sole Proprietorship, a Limited Liability Company, or a Corporation.
Depending on what you decide, there are financial and tax implications that may result. We can help you sort out just what entity would be best for you and your business.
Once the entity is selected, we will proceed with a complete setup of your new business which includes:
- Verification of name availability
- Preparation of Articles of Organization/Incorporation
- Provision of applicable identification and tax ID numbers
Schedule your FREE consultation today and let us help you make your business official!
Learn a little more about the most popular entities below:
Sole Proprietorship
If you are looking to keep things simple, a Sole Proprietorship or DBA (Doing Business As) may be the option for you.
| Benefits | Protections & Taxation | Drawbacks |
|---|---|---|
| Easy, cost-effective setup | You’re personally responsible for business liabilities | No personal liability protection |
| You can accept payment or and refer to yourself using a business name without actually forming a new company | Taxed just once if your business is classified as a sole proprietorship or partnership—you pay on profits in your personal tax return | Not a legal entity |
Limited Liability Company
Make your business official and ensure you are not protected from being personally responsible for business debts and liabilities with a Limited Liability Company (LLC).
| Benefits | Protections & Taxation | Drawbacks |
|---|---|---|
| No Board of Directors are required | You are NOT personally liable for business liabilities | Can be expensive to set up and you must file annually to stay in compliance |
| Flexibility to run and manage your business | You have the option of being taxed once or twice | LLCs can’t go public |
| An unlimited number of owners (aka “members”) are allowed | You are taxed once on profits received | LLCs aren’t recognized globally; other countries may tax you as a corporation |
Corporation
If you are planning to issue shares, go public, or expand globally, a Corporation (S or C corp) is the right option for you.
| Benefits | Protections & Taxation | Drawbacks |
|---|---|---|
| Best if you plan to go public one day; You can issue shares to founders, employees, and investors | You are NOT personally liable for business liabilities | Can be expensive to set up and you must file annually to stay in compliance |
| An unlimited number of owners (aka “shareholders”) are allowed. Owners may get preferred stock | If it is a C Corporation, you can be taxed twice. The business pays taxes at the corporate level and shareholders pay on income received | Less management flexibility; must have a board of directors |
| Corporations are recognized internally and are preferred by investors | If it is an S Corporation, double taxation is avoided | More admin; strict rules about holding meetings and keeping records |