As you take the first steps toward choosing the entity type for your new business, you will find that there are multiple options for you to choose from. The differences can be difficult to understand and it can be frustrating trying to make the right choice for you and your new business.
One of the most common entities is an LLC, Limited Liability Company. An LLC is a type of business that separates your finances from those of your business. Similar to an LLC is a PLLC which provides the same protections for business owners providing services that require a license such as those opening a medical practice.
An S-corporation protects your finances the same way an LLC does, but it can be daunting for a new business. An S-Corp requires a board of directors and the filing of multiple reports, which an LLC does not. One difference between an LLC and an S-Corp is the level of regulatory commitment you would be undertaking. An advantage of an S-Corp is the potential savings of self-employment taxes. Of note, an S-Corp is limited to 100 shareholders and all shareholders must be domestic.
A C-Corporation, like both the LLC and S-Corp options before it, protects your finances in the event of your business being sued. Like the S-Corp it relies on shareholders, but it does not have a limit on how many shareholders can be a part of the company. A major disadvantage not seen with an S-Corp or an LLC is what’s referred to as “double taxation,” wherein the Corporation’s profits are taxed, distributed, and taxed again as dividends to the shareholders.
Each business type comes with unique advantages and disadvantages. As experts in accounting management solutions, ATS is well-versed in each of the options available to your new business. Call us today at 303-232-8300 and speak to one of our friendly affordable accounting advisors to schedule your free consultation.