INCORPORATION: Which type of business entity is right for you?

Deciding which type of Business Entity is right for you can be an extremely confusing procedure. Oftentimes the wrong decision can come back to haunt you down the road. Should we become an LLC? What is an S-Corp? These are questions on every new business owner’s mind.

At SAPG we strive to keep our clients informed every step of the way while helping them achieving their personal and business goals. Here is a breakdown of some of the different forms of a business entity that may fit your company’s needs.

Sole Proprietorship

This is NEVER a good option! The owner and business are recognized as the same entity. This opens up a floodgate of problems for the owner. The owner bears full legal liability in the event of a lawsuit. As such all of the owner’s personal assets (home, auto, savings, etc) are fully at risk.

LLC

The most common type of Business entity for small businesses and startups. An LLC offers protection to the owner, guarding them from some business liability in the event of a lawsuit. The downside of which is that an LLC still puts all tax loss liability on the owner.

S-Corp

Owners of an S-Corp obtain many legal protections but still face all tax burdens, similar to an LLC but generally with more partners involved. Within an S-Corp there are a few more differences. Primarily Non-US Citizens/Residents cannot be a member of an S-Corp. S-Corp’s also have a restriction on the maximum amount of shareholders or owners it may have, capping at 100.

C-Corp

This business entity offers the most legal protection for its owners. Generally sought after for outside investors. A C-Corp lifts some of the restrictions put on a S-Corp, primarily it may have more than 100 shareholders; Shareholders are not required to be US Citizens/Residents. C-Corps are subject to corporate income tax, but in return all tax loss is not passed to the owners each year.