Choosing the right legal structure for your business is a crucial step that can impact your taxes, liability, and overall operations. Here's a breakdown of three common options:

1. Sole Proprietorship

• Simplest form: You and your business are considered one entity.
• Easy setup: Minimal paperwork and formalities.
• Taxation: Profits are taxed as personal income.
• Liability: You are personally liable for business debts and obligations.

Best for: Solopreneurs, freelancers, and small businesses with low risk and simple operations.

2. LLC (Limited Liability Company)

• Separate legal entity: Provides personal liability protection.
• Flexible taxation: Can be taxed as a sole proprietorship, partnership, or corporation.
• More complex: Requires more paperwork and compliance than a sole proprietorship.

Best for: Businesses seeking liability protection and flexibility in taxation.

3. S Corporation

• Separate legal entity: Offers liability protection.
• Pass-through taxation: Profits and losses are passed through to your personal income, avoiding double taxation.
• Strict requirements: Must meet specific eligibility criteria and follow stricter operational guidelines.

Best for: Established businesses with significant profits and a desire to minimize tax burden.

How to Choose the Right Formation

Consider these factors:

• Liability: Do you need personal liability protection?
• Taxation: What tax structure is most advantageous for your business?
• Complexity: How much paperwork and compliance are you comfortable with?
• Future Plans: How do you envision your business growing and evolving?

Be sure to speak with an expert advisor on which formation is best for your business? Need help setting up your LLC? Give us a call for assistance.