WE'VE MOVED!
We are proud to announce our NEW community destination. Engage with resident experts and fellow entrepreneurs, and learn everything you need to start your business. Check out the new home of StartupNation Community at startupnation.mn.co
We are proud to announce our NEW community destination. Engage with resident experts and fellow entrepreneurs, and learn everything you need to start your business. Check out the new home of StartupNation Community at startupnation.mn.co
Options
A (hopefully) Helpful Guide on Business Entities
StartupLawGuy
subscriber Posts: 2
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
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
Sign In or Register to comment.