When starting a business, you may choose from several types of business entities. Choosing the proper business entity for your business is vital to the success of your project. One of the primary considerations in selecting a business organization is the protection of the owners of the business from liability. Other considerations include tax treatment by the federal and state governments, management structure, future ownership, and capitalization.
State laws determine how particular entities should be set up and conduct their business. These laws are very specific and set out the legal responsibility of each business form. Taxing authorities and regulatory agencies also have laws that pertain to business. Listed are common business structures:
- General Partnership
- Limited Liability Partnership
- Limited Partnership
- Limited Liability Limited Partnership
- Limited Liability Company
- S Corporation
Read Business Structures Defined PDF for brief descriptions of each business structure.
You can file to incorporate as an LLC and be taxed as an S-Corporation and that’s one of our favorite ways to set things up because you can save money on self-employment taxes by paying yourself a reasonable salary through payroll and receiving all other profits as non self employment taxable distributions.
If you are an LLC not taxed as an S-Corporation, ALL of the profits are subject to self-employment tax PLUS you are more likely to be audited if the business tax return is filed on your personal tax return and not separately.
Call us to get a LIFT Start-Up Session scheduled, and we’ll meet with you privately to choose the right entity plus other legal, insurance, financial and tax systems for your next business.