If you’re the owner of a new startup business then one of the most important steps you must take is selecting a type of entity to structure your business under. The entity you choose for your company will have both tax and legal implications, which is why it’s a decision that you shouldn’t take lightly. Here in Redding, CA, at J.R. Martin & Associates, we can assist with entity selection for your business. Our team of tax and finance specialists will educate you about the details and implications of each type of business entity, discuss the pros and cons of each, and help you choose which entity will suit your business best. These are the primary business entities that you can choose from:
A sole proprietorship is arguably the easiest entity option to choose. It requires limited recordkeeping compared to other entities. A sole proprietorship is an option if you are the only owner of your company and responsible for all of its assets and liabilities. The significant risk in choosing a sole proprietorship is that there’s no difference between the owner and the business, meaning that debt collectors can come after your personal finances and assets if your business runs into financial trouble. Because of how simple it is, it’s the default structure for startups. We rarely recommend this entity selection; however, we can still provide professional support for any business owner who has chosen this structure.
A partnership is a business entity in which two or more owners share both business profits and losses. You can structure partnerships in several different ways. For instance, a general partnership is the default entity structure for businesses with two or more owners. A general partnership is similar to a sole proprietorship in that the partners share all debts and liabilities and that there’s no difference between the business and their personal finances. A limited liability partnership will limit the owners’ personal liability and protect you from taking on the personal liability for one of your partner’s actions.
A corporation is a stand-alone legal entity that its shareholders own. To become a corporation, you will have to go through the incorporation process and be authorized by the state. When your business is incorporated, you and any partners you have in ownership will be personally protected from liability should your business be exposed to any lawsuits or legal claims. The standard corporation entity is the C Corporation, but you can also incorporate your business as an S Corporation, which means that shareholders will be taxed on a personal level for any corporate profits, allowing them to avoid double taxation.
It’s important to note that S-corporations only exist on the federal level. We can help you go through the incorporation process should you choose the corporate entity as your business structure.
These are the primary entities that you can select when structuring your business. We, in Shasta County, can provide in-depth information about each entity selection and help you determine which entity selection best suits your particular business needs. Besides helping your business go through the entity selection process, we can also provide further business strategy support based on the entity you’ve chosen.
Speak with one of our Trusted Advisors to find out which of our packages is best for your business needs.
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