Creating an LLC or Forming a Partnership? What does Entity Structure mean for a Small Business?

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Ever since the first group of caveman gathered together to catch a woolly mammoth, people have been combining their labor and capital, (clubs and spears in this case), to achieve business success.

Starting a business now is considerably more complicated.

Owners can choose to organize as a sole proprietorship, joint venture, partnership, Limited Liability Company, S Corporation, or C Corporation.  The best choice depends on the business, the industry, the owners and the tax law.  Remember, the organization’s needs can evolve as the business grows.

Unfortunately, some owners form businesses without expert advice, or neglect to reconsider entity choice when situations change.

Different forms of organization can lead to significantly different legal and tax outcomes for the owners.  In particular, the business owner’s compensation can be taxed at several different rates.

Many small businesses owners could achieve better results by switching entity form.

In my next post, I’ll discuss some of the pros and cons of each entity.

Clarus Partners understands small business.  If you need help choosing or changing entity form to achieve your goals please contact Nancy Supowit, CPA at nsupowit@claruspartners.com or call 614-545-9100.

 

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