Many decisions must be made when you start a business. For example, you must choose a name for the company, a location and a target consumer base. However, one of the most important decisions you will make as you start you business involves the company’s structure. Popular business structures include Limited Liability Company (LLC), Corporation, S-Corporation and Sole Proprietorship.
Both incorporation and LLC formation allow you to avoid at least some personal liability for the company’s debts and other financial obligations. Corporations provide more protection than LLCs. However, while income received by an LLC is taxed only once (members of the LLC pay taxes on income they earn), income received by a corporation is taxed twice (once at the corporate level and once at the shareholder level).
If your company will have 75 shareholders or less, you can also form an S-corporation, which provides the protection of a corporation but allows you to pay taxes on income only once. Finally, if you choose to keep your business a Sole Proprietorship, you and your business will be considered one entity for tax purposes. While you must file only one return, you will be responsible for any and all of the business’s debts and income.
To learn more about registering your company and choosing a structure, contact Choice Accounting Solutions for additional guidance. We can help you make the best decision for your circumstances. Choice Accounting Solutions is also here to help with all of your accounting and tax needs after your business is up and running.