Is your current business entity still the right one for you? Businesses grow – hopefully. Businesses change – always; which is why it’s good practice to review your business entity periodically.
If you’ve made some big changes this year in the size or scope of your business (like: accumulated more assets and/or increased liabilities); it’s definitely time to re-take your business entity temperature.
To get the most out of your business it’s important to have the right business structure. The proper entity type can help maximize your financial and operational success; and is important in determining your limitations and liabilities.
Your accountant or attorney can help you decide what type of business structure best fits the needs of your company today. But here’s a handy comparison chart to get you started:
Business Comparison Chart:
|
C Corporation |
Subchapter S Corporation |
Limited Liability Company |
General Partnership |
Sole Proprietor |
|
| Owners have limited liability for business debts and obligations |
X |
X |
X |
||
| Created by a state-level registration that usually protects the company name |
X |
X |
X |
||
| Business duration can be perpetual |
X |
X |
X |
||
| May have an unlimited number of owners |
X |
X |
X |
||
| Owners need not be U.S. citizens or residents |
X |
X |
X |
X |
|
| May be owned by another business, rather than individuals |
X |
X |
|||
| May issue shares of stock to attract investors |
X |
X |
|||
| Owners can report business profit and loss on their personal tax returns |
X |
X |
X |
X |
|
| Owners can split profit and loss with the business for a lower overall tax rate |
X |
||||
| Permitted to distribute special allocations, under certain guidelines |
X |
X |
|||
| Not required to hold annual meetings or record meeting minutes |
X |
X |
X |
Contact The Bookkeeping Company for assistance in identifying the best entity for your business. Chart source: The Company Corporation.