Choosing an entity is just like buying a suit. You can't just choose a one size fits all entity. A legal entity should be specifically tailored to business-size and operational requirements of its owners. Consider these factors when selecting an entity.
Pick your price
Don't just choose the cheapest entity for your business. Pick the entity that makes sense for your long-term business plan. Remember you're going to get what you pay for. Quality and complexity comes at a premium.
Business liabilities can quickly turn into personal faux pas if the choice of entity doesn't provide protection. Avoid personal liability by selecting an entity that provides liability protection. Remember sole proprietorships and general partnerships do not provide liability protection.
When it comes to compensation, some of your options can be limited. So make sure to do your homework. You don't want to be caught at a black tie event without your bow.
If you choose an off-the-rack entity make sure to also consider transfers of property, ownership limitations and distributions I.e. don't forget to match your socks with your tie.
There are several factors to consider when choosing the proper legal entity for your business. Don’t make the mistake of picking an entity without trying it on. Consult with your attorney and CPA before making your selection. They will assist you in finding the best fitting entity and they can tailor it to your exact business plan specifications. At the end of the day, the right choice in business entity could make your business look like a million bucks. So make the right choice.
Wondering which entity type is best for your business? Post a comment below or contact our Tax Planning & Preparation Group at 440-449-6800.