Among the many decisions you need to make when launching a business is selecting a business structure. If you do nothing, your business, by default, is structured as either a general partnership (multiple owners) or sole proprietorship (solo owner). These may be the simplest entities to form, but they offer one major drawback: There’s no separation between the business and business owner.
If your partnership or sole proprietorship business is sued or can’t pay its bills, your personal assets can be on the hook. That is why both the Limited Liability Company (LLC) and C corporation, or just corporation, are popular business structures, as they minimize the owner’s personal liability. Yet, they have vastly different approaches to taxation.
Here are 5 differences to think about when deciding on structure:
1. Pass-through business structure vs. non pass-through entity
2. Ability to leave money in the company
3. Social security and Medicare taxes
4. Ability to deduct a loss
5. Employee benefits
When it comes to choosing a structure, there’s no single right answer that works for every business. You need to think about your financial situation and future plans to determine the optimal structure for your needs.
Courtesy of Entrepreneur
For help deciding which business structure is best for you contact Neikirk, Mahoney and Smith at 502-896-2999