How to Choose the Right Entity for Your Business

When starting a business, and while choosing an entity type, you will have to register the business locally and with organizations on the state level. There are a variety of business entity types in the US: Sole Proprietorship, Partnerships, Limited Liability Companies, and Corporations. Here is more on how to go about choosing an entity for your business:

Sole Proprietorship: This form of business has a single owner and that owner may be liable for anything that goes wrong with the business. During tax season, the owner, and not the business, is taxed which can be quite beneficial.

Partnerships: Partnerships are easy to establish and carry a tax benefit where each partner will file taxes individually. The company itself is not taxed. This is called pass through taxation.

LLCs: LLCs have the benefits of limited liability and pass through taxation. This means that you cannot be personally accountable if your company is sued. It also means that you and your shareholders will be taxed on a personal level and not a corporate level. LLC’s are also structurally flexible when it comes to governing bodies in the company.

Corporations: Like LLC’s, corporations provide limited liability for their shareholders. However, corporations are taxed as a company even after the shareholders pay individual taxes. Corporations also enjoy a specific structure which requires a group of shareholders to vote for any potential changes.

Each business entity has its own unique benefits and drawbacks. Once you’ve figured out which business entity is right for your company, you will need to file for taxes. This can be done by submitting an EIN form for your chosen entity at a trusted website such as https://www.govdocfiling.com/.