Which is the Right Business Structure for You?


Here are the highlights of the various business structures to help you better choose which one will work for your business.

Limited Liability Company

  • Hold appreciating assets that generate passive income
  • Provide beneficial tax treatment for passive income
  • Want simplicity and economy of operating a single structure
  • Want estate planning vehicle or vehicle that allows separation between management and owners
  • Want flexibility to distribute profits out of strict ownership ratio
  • Protection of personal assets through state laws in many cases
  • May be permitted to function through Series LLC, in some cases

Limited Partnership

  • Hold appreciating assets that generate passive income
  • Provide beneficial tax treatment for passive income
  • Want ownership versus management rights and duties to be clear
  • Want the security of a long-established entity with asset protection case law
  • Desire an optimal estate-planning vehicle that keeps control with parents even where majority ownership has passed to children

C Corporation

  • Want maximum amount of tax deductions and tax savings
  • Don’t require all income from the business to live on each month
  • Already at highest personal tax bracket and looking for ways to reduce tax hit
  • Intend to go public at later date
  • One or more of the owners are not U.S. residents
  • Income generated will be treated as earned income, not passive
  • Want maximum control over when and how taxes are paid
  • Want the most comprehensive medical coverage available

S Corporation

  • Income generated will be treated as earned income, not passive
  • Not in highest personal tax bracket
  • Owners are all U.S. residents
  • Expect losses in early years
  • Want some company-paid medical coverage, but don’t require full plan
  • Already own one C Corporation and wish to avoid Controlled Group issue

There are many variables when you’re structuring a business. That’s why it’s hard to go through a quick-service website. Unless you talk to someone who’s got some knowledge and experience on both the tax and the legal side, it’s hard to know what you don’t know. And that can leave you vulnerable.

Got questions? Contact us! We’re here for you.

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