Choosing the Right Entity Type
We believe that the basis of a solid business venture is laid by selecting the right entity and planning for your new business. Our firm can consult with you are choosing the right entity type – whether it’s a Sole Proprietorship, C-Corporation, S-Corporation, General Partnership, Limited Partnership or Limited Liability Company.
We will work with you considering both corporate and individual tax consequences regarding your choice of entity type as well as asset protection. Our goal is to help you select the right structure and then realize the tax savings and operational benefits each year going forward.
There is no clear-cut right or wrong answer when choosing your entity type. The choice you make will involve weighing the advantages and the disadvantages of various factors that apply to your particular business. You should also keep in mind that there will be changes in the nature of your business as it grows and evolves over time. Your entity type and/or its tax classification can be changed. The cost of changing entity type varies with the circumstances. Changes in your business operations may make it advantageous to change your entity type and/or its tax classification. Your choice of entity type and business structure should be reviewed every three to five years.
When Choosing a Business Entity Type, You Should Consider:
(1) the degree to which your personal assets are at risk from liabilities arising from your business
(2) the best way to pursue tax advantages and avoid multiple layers of taxation
(3) the ability to attract potential investors
(4) the ability to offer ownership interests to key employees
(5) the costs of operating and maintaining the business entity
The availability of a particular entity type initially depends on the number of owners. A single owner may operate as a sole proprietor, a corporation, or a limited liability company. If there are two or more owners of the business, by definition it cannot be a sole proprietorship, but it can be a corporation, limited liability company, general partnership, limited partnership, or, in certain situations, a limited liability partnership.
We will also work with you to cultivate your business plan. We can be as active or passive as you desire and our approach can range from preparing a complete business plan to simply coaching you and assisting you in writing and developing the business plan. We can also assist you throughout the start-up phase of your business as a trusted adviser and consultant. Our goal is to simplify the start-up and development phases so you can focus more of your attention on growing your business.
We had been using MeredithCPAs for several years to prepare our c-corp return, but I had been doing our personal income taxes to try to save money. We use to make hundreds of thousands at the c-corp level, but we are getting into retirement age and started having losses on our gross income and on investments.
MeredithCPAs took the extra time to not only prepare our corporation’s return, but to ask us some detailed questions about why we had the company organized as a c-corp. She prepared a cost benefit analysis showing us that we would be saving over 30k immediately if we elected s-corp status. We already saw 15k of that savings from the change of entity type when MeredithCPAs prepared our 1040 for 2012, and next year we will see the rest.
On top of that, there are additional savings by reorganizing some of our wages that are subject to Medicare and social security taxes into non-taxable distributions. I really appreciated the fact that M&A didn’t just number crunch but actually analyzed our situation as a whole to find the best tax saving strategies possible.
I learned a valuable lesson that by letting them take over all of our planning and tax work; we end up saving so much more than what I could have done myself.