If you have a business and you want to get the load of taxes and liabilities from off your shoulders, forming a business entity is one of the best things you can do.
There are different types of business entities but most entrepreneurs prefer the one that makes their businesses have a distinguished entity from its founders.
Such entities include the Limited Liability Company (LLC) and Corporations.
What Are The Different Types Of Business Entities?
There are several types of business entities that can be formed.
Sole Proprietorship
A sole proprietorship doesn’t require any complicated or formal process to be formed. Taxes are filed according to income and by the business owners. However, a sole proprietorship entity makes the owner of the business liable for any lawsuit, debts, or other issues that arise from the business.
Partnership
From a taxation perspective, a partnership allows all income and liability to ‘pass through’ to the business partners according to their ownership percentage of the business as is evident in the agreement. This makes the business and personal entity to be inseparable and liabilities are accounted for by the members of the partnership.
Limited Liability Partnership
An LLP may have many similarities with the general partnership but a prominent difference is that it can be registered with the Department of State. After registration, the business entity liabilities are only borne by the parties that are responsible for it and not every member of the partnership.
S Corporation
S Corporation and C Corporation are similar in many ways. However, the S corporation tax scheme is the same as that of a partnership. The S corporation is considered best for smaller corporations or businesses and has an allowance of a limited number of shareholders.
C Corporation
A C corporation allows for the transfer of stock, limited liability, longevity, and unlimited choices in the structuring of stock ownership. The tax treatment of a C corporation is quite favorable; however, the entity might run into exhaustive expenses in administrative running, double taxation, and compliance proceedings.
Limited Liability Company
This is one of the most popular business entities there is, alongside the corporations. It offers liability protection just like a C corporation while having tax properties of a partnership or sometimes as a corporation.
Forming a business entity involves a lot of daunting processes and copious paperwork. It is a process involving several legal procedures and should be done by professionals to avoid issues that may haunt your business in the future.
Seek the services of specialized accountants and business attorneys to help you with your business entity formation process. Considering your type of business, a professional will also advise you on the type of business entity that is right for you.
From filing the formation paperwork to setting up of the formation tax and financial accounts, you need professional help. You also need to be up to date with state laws and get your business insurance intact.
At SMARTCPA, there is a team of specialists who can help you achieve a suitable business entity of your choice. Additionally, business entity formation with SMARTCPA is quick and affordable and you will receive expert advice on how to go about your business to avoid incurring heavy taxes.