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A (hopefully) Helpful Guide on Business Entities

StartupLawGuyStartupLawGuy subscriber Posts: 2
edited February 2008 in Grab Bag
 I often see a lot of questions about choice of business entity here on the SUN forums.  There is A LOT of information on the internet about this issue; this can be good and bad.  It`s good in that it allows entrepreneurs to research and become conversant on the issue.  It`s bad in that it can become VERY confusing for those without much prior knowledge about the issue.  Hopefully, this will clear up some basic questions.
 
I`m going to make a generalization and say that about 90% of the SUN entrepreneurs that I`ve seen on the forums are very, very early stage, home-based, single-owner business people.  This being said, it is very advisable to obtain a business entity under which to conduct business.  In practical terms, the two major choices in this respect are the S Corporation or the Limited Liability Company  (LLC).
 
When I get a client who is similar, demographically speaking to the type of entrepreneur I just described, my general answer is this: there isn`t much of a practical difference between the S Corporation and the LLC.  Both provide liability protection for the owners, and both provide pass-through tax treatment, and these are the benefits inherent in choosing either an S Corporation or an LLC over a C Corporation, Sole Proprietorship or General Partnership.    
 
This seems like a really simple answer, but in terms of the entrepreneur and entrepreneurial venture I just described, there are not strong arguments for or against either an LLC or an S Corp.  Don`t get me wrong, there are certainly arguments either way, my point is that choosing one over the other isn`t going to ruin an entrepreneur`s life or doom his or her venture to failure. 
 
I`m sure there will be those on SUN who disagree, but more important than obtaining a business entity is running it properly so that it can provide to the owner all of the benefits and protections a business entity has to offer.

 
 
 

StartupLawGuy2/16/2008 2:01 AM
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