What’s the best structure for your business?

Entrepreneurs are likely aware of the fact that business incorporation is a good way to protect personal assets. It’s important to understand the nuances of different entities to ensure that the best model for a company is chosen.

Inc.com offers some tips on which entity might be the best fit for a business. The source says many small businesses choose to start as an LLC. LLC companies don’t require formal meetings, and they generally have minimal paperwork.

S corporations are another popular choice for entrepreneurs. Like LLCs, S corporations are “pass-through” entities, meaning businesses are not taxed; instead, profits and losses are filed on individual shareholders’ tax returns. This saves business owners from “double taxation” which sometimes occurs with companies.

C corporations, on the other hand, do get hit with double taxation. They are less common with small businesses. Generally, C corporations are used by larger companies. Still, Inc.com reminds entrepreneurs that C corporations can offer some very handy, unique benefits to small business.

The entity gives a business the chance to use a medical reimbursement plan, as medical expenses can be deducted while shareholders enjoy the benefit tax-free. Additionally, businesses that need substantial start up funds or expansion capital will likely find venture capitalists are more likely to invest in a C corporation.

This may be especially useful for young businesses as funds could be harder to come by in the near future. Legislation recently proposed by Senator Dodd might render a number of angel investors no longer credible.ADNFCR-3052-ID-19692788-ADNFCR

Melissa Clark
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Melissa Clark

Head of Content & Customer Marketing at Incfile
Melissa sets the vision for Incfile's content marketing and customer relationship management. Melissa has more than 10 years experience in various marketing roles, and a passion for supporting small businesses as they incorporate and grow. She loves sharing information that will help business owners maximize their LLCs, Corporations and Nonprofits. In her spare time, Melissa is an active member of The Junior League and enjoys running half marathons.
Melissa Clark
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