Tax Tip of the Week | No. 422 | Entity Choices For Businesses

Tax Tip of the Week | Aug 30, 2017 | No. 422 | Entity Choices For Businesses

A sound foundation is critical for any business. Part of that good foundation is choosing the proper entity. Too often this important piece is overlooked or even just ignored which can cause significant problems down the road.The proper entity choice affects many financial and legal aspects of your business. These considerations will affect the amount of your income taxes, both now and in the future for your business along with your personal income taxes.This decision also affects how owners (sole proprietorships, members, shareholders or partners) are paid. Various payment methods for the owners may include dividends, guaranteed payments, reimbursements, wages, subcontractor payments and distributions – all of which may be taxed differently.In today’s litigious times, asset protection is a critical factor as well. Different entities have different degrees of asset protection. For many businesses asset protection may be the most important consideration.Some of the typical entity choices include:1.  Sole proprietor - default entity when no selection is made2.  LLC (Limited Liability Company)3.  Corporations:a. S Corporationb. C Corporation4.  Partnerships:a. General Partnershipb. Limited Partnershipc. Family PartnershipEach type of entity has its own pros and cons. No one size fits all. One must work through the features of each to determine the proper fit.As your business evolves, please remember further evaluation of your business entity choice is needed.This week’s author……..Mark Bradstreet, CPAYou can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.Rick Prewitt - the guy behind TTW...until next week.