Choosing A Business Entity

Choosing A Business Entity

A significant planning challenge for all entrepreneurs, businesses and their financial and legal advisors is to select the best form of business organization. This critical analysis applies to new business ventures, but it may also be applicable to more mature businesses.

There are several forms of business entities, but the main ones are:

  1. Sole proprietorships;
  2. C Corporations (a regular corporation created under state law);
  3. Partnership structures; and
  4. Limited liability companies (also created under state law).

There is also a hybrid structure called the “S Corporation”. The S Corporation is a form of taxation based upon a tax-election more than a distinct business entity type. For example, both C Corporations and Limited Liability Companies may choose to be taxed as S Corporations.

The choice of business entity analysis has many factors that should be carefully considered
including, but not limited to,

  1. Taxation,
  2. Limiting owners’ liability,
  3. Projected earnings, losses and capital expansion needs,
  4. The possibility of additional new owners,
  5. Potential exit strategies and the likelihood of sale, and
  6. The estate planning goals and needs of the owners.

The two main factors to be considered are taxation issues and the need to limit owners’
liability. With these key factors in mind, many entrepreneurs conclude that either limited liability
companies or C Corporations are their entities of choice.

Please consult with a Certified Public Accountant and a business planning attorney in your
home state when contemplating starting a new business venture.

Walston Advisory Group has the knowledge and experience to advise you regarding your
business taxation and planning needs.
 

This article does not constitute legal advice nor does it establish any attorney client relationship. This article
is general information to encourage individuals to seek legal advice in their home states.

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