Selecting a Business Entity

If you’re starting a new business, or looking towards developing your existing small business, knowing types of entities you can select for incorporation or growth allows for better tax planning and accounting strategy. Our Firm is a professional, full service CPA firm that wants to see you grow your business efficiently. Understanding the benefits of one entity or another can better prepare you for the tax implications of incorporation or choosing a new structure.

Evaluating and Choosing your Business Entity

• Sole Proprietorship – As the sole owner of your business, you are responsible for assets and liabilities. An easy and inexpensive form of ownership, this entity allows you complete control, and comes with easy tax preparation processes. However, there is a large amount of personal liability with no legal separation between you and your business.
• Partnerships – Partnerships are defined as single businesses that are owned by two or more people. There are three types of partnerships: general, in which the profits, liability, and management duties are divided equally among the owners; limited partnerships allow partners to have a certain liability and input on management decisions; joint ventures are similar to a general partnership, but only for a limited time or single project. If you consider going forward with this venture, you must file your taxes to match your stake or share in the company.
• Corporations – An independent legal entity owned by shareholders, a corporation itself is held legally liable — not the shareholders who own it. You may file as an S-corporation, which is created through an IRS tax election. Known as the subchapter S designation, selecting an S-Corp limits the financial liability you are responsible for, with profits and losses passing through to your personal tax return. Contact our Ocala CPAs for more information on this specialized entity.
• LLC – A Limited Liability Company is a hybrid legal structure that combines the liability advantages of a corporation and the tax efficiencies and freedom to run operations in a flexible manner like a partnership. The owners of the company are referred to as members, and their personal assets are exempt; you must file articles of organization, a simple document that legitimizes your LLC, provides business information, and the name of the members. However, if a member leaves the LLC, the business is dissolved and must close. Consider who your members are and plan a head when choosing this specific entity.