What’s the Best Structure for Your Business?

Choosing the Right Business Entity LLC Nonprofit Corporation Small Businesses Are Popular Than Ever LLCS and sole proprietorships combined are the most popular type of business in the U.s. there are over 23 million. Forming LLCS has increased in popularity, from 2.3 million a year in 1985 to over 8 million a year now. There are more than 1.5 million nonprofits. There are more than 4.5 million S Corporation owners in the U.S. and over 1.5 million C Corporations. Legal Entity Types When You Form a Separate Business Limited Liability Companies (LLCS) where you're self-employed, either by yourself or with partners, but you operate the business as a completely separate entity S Corporations &C Corporations Nonprofits where the organization does not generate which can provide tax and ownership advantages profits from its funds Should You Choose an LLC? 3 LLCS are easy to own and run and have lightweight compliance and tax requirements. They are ideal if: You want simple and straightforward business ownership. You want liability protection that separates personal and business assets. You do not want internal or external shareholders. Should You Choose a Nonprofit? 4 Nonprofits must use funds generated to pay for reasonable business expenses and cannot make a profit from activities. They are ideal if: You do not want to make a profit from the business. > You want to receive public and private grants, making it easier to get operating capital. Should You Choose 5 an S Corporation? Corp S Corporations are slightly more difficult to run than LLCS and have more complex tax and reporting requirements, but they can provide a tax advantage. They are ideal if: You want liability protection that separates personal and business assets. You want to raise money through private investors purchasing stock in your business. You intend to have only one class of stock and not more than 100 shareholders, all of whom are U.S. citizens or residents. You want to reduce the tax you pay in terms of self- employment or payroll taxes. Important note LLCS can choose to be treated as an S Corporation for tax purposes by filing Form 2553 with the IRS. If reducing your tax burden is your primary reason for becoming an S Corporation, then starting an LLC and filing this form will be easier. Should You Choose 6 a C Corporation? C Corporations provide the most flexibility in terms of raising money. This does come with heavy administrative overheads and a higher tax burden. They are ideal if: > You want liability protection that separates personal and business assets. > You want to raise money from selling stock. > You want more than 100 investors to make an Initial Public Offering or to offer shares on a public stock exchange. > You are okay with paying corporation tax on any profits. > You are okay to be taxed on earnings through dividends or other compensation. incfile References https://www.startups.com/library/expert-advice/sole-proprietorship https://www.berkmansolutions.com/articles/entities/30-years-of-new-business-entities https://s-corp.org/our-history/ https://taxfoundation.org/us-has-more-individually-owned-businesses-corporations/ https://learning.candid.org/resources/knowledge-base/number-of-nonprofits-in-the-u-s