If your a new business owner or someone looking for guidance with choosing the right entity for your business, please read on...
Choosing the right entity can be hard and confusing, and choosing the right entity comes down to; the type of ownership you want, the amount of liability you want, how the entity is taxed, and how you are paid through the entity.
LLC’s - Limited Liability Companies are great for business owner’s who want limited liability (you’re protected in case something goes wrong, e.g. a lawsuit). This could apply to a real estate company or a hedge fund. An LLC typically has a lot of investors involved, and these investors tend to get preferred dividends. Meaning, they get paid back before the founders do.
S-Corp’s - Great for companies with employees such as, accounting firms and restaurants. An S-Corp will help you minimize the amount of tax you have to pay (15.3% self employment tax). All owners of an S-Corp get profit distributions according to the percentage of the business they own.
C-Corp’s - Typically only big companies form under this entity. Doesn’t mean you can’t, BUT it might not make sense considering there can be double taxation.
If you have any questions on this, feel free to reach out to our team. We will be posting a series on each individual entity next week!