Business Entity Selection
One of the biggest decisions facing anyone who owns or is planning to own a business is the selection of the appropriate type of business entity. There are significant legal and tax implications that differ from one type of entity to the next. The team of professionals at Anstiss & Co. can help you through the process and ensure that you select the type of entity that is the best fit for you and your objectives.
Based on a number of factors, including tax consequences, the sharing of profits among potential partners, and liability concerns, business owners have a number of options to choose from including a limited liability company (LLC), sole proprietorship, C corporation or S corporation.
At Anstiss & Co. we understand the full range of ramifications involved with the entity selection process. Since 1964, we have been successfully helping business owners make the most appropriate entity selection, given their particular set of circumstances.
LLC’s provide for a considerable amount of flexibility in determining how the net profits flow through to the ownership. LLC’s can distribute profits in whatever manner they see fit, can draw investment from foreign sources, and provide for increased operational ease and flexibility. If you select a limited liability company as a business entity, the owners are protected on a personal level form liability that might arise from the services that the business provides for its customers.
Sole proprietorships assume full liability for all services agreed upon, and the taxation is connected directly to the owner of the business.
C corporations pay shareholders or investors based on the company’s recognized profit or loss. However, the corporation is generally taxed when income is earned, and the income is then taxed again when the shareholders are given payment as dividends. To avoid this double taxation, your business may benefit from choosing to be an S Corporation, with taxes taken only after the income flows through to shareholders.
If you select an S Corporation, all of the net profits flow through to the ownership on a pro rata basis. An S corporation does not have the flexibility offered in limited liability companies. If there is a 50/50 partnership created in an S corporation, and one of the partners does all the work, the profits will still flow through to the owners on a 50/50 basis. An S corporation designation also offers the ownership personal liability protection in the event of a lawsuit.
What is the best entity selection for your business? How can tax burdens be minimized and liability appropriately managed based on this single major decision? Engaging the Anstiss & Co. for business consulting services can answer these questions, and put your business on the right track for a successful future.
