What Are Your Entity Options?
When starting a business or taking it to the next level, the choice of entity and structure is important. Most business formations involve either a corporation or a limited liability company (LLC.) A corporation can be either a C corporation or an S corporation, and an LLC can be single-member or multimember. All these entities provide limited liability protection to shareholders or members provided important steps are taken.
The Law Office of Marc L. Edwards will help you determine which entity is best for your business, and then help you correctly file and create your business.
An LLC is flexible, less formal than other entities and generally involves less paperwork and fewer ownership meetings. It is more suitable for ownership, management and operation of rental real estate properties.
A corporation is less flexible, more formal, and it requires paperwork, stock issuance, minutes and board and shareholder meetings. Despite this, corporations have major benefits as well. This entity is more suitable for business operations involving employees, product manufacturing and/or sales.
An S corporation is a pass-through entity that pays no federal income tax and a much lower state income tax. Losses pass through to the individual shareholders in most circumstances, making this arrangement generally best for smaller businesses. At least one employee is required to report compensation and pay payroll taxes. Distributions are generally not taxable so money can be taken out of the corporation easily.
A C corporation pays both federal and state income tax, requires at least one employee and is generally best for larger businesses. Losses do not pass through to individual shareholders and money can only be taken out of the corporation in the form of a dividend, which is also taxable to the shareholders (i.e., the second or “double” taxation).
All business entities must file income tax returns each year with the IRS and state government tax department.
All business owners need to account for effective management, separate operation as a business entity and proper tax compliance. Proper planning at the outset can prevent pitfalls in the future. Attorney Marc L. Edwards will help you create a business entity that is strong enough to protect you yet flexible enough that you grow, expand and prosper.
Contact A Skilled Lawyer About Your Business Plans
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