When running a business, there are myriad tasks and responsibilities to handle, from setting strategy to hiring to answering the phones! One of the key decisions you must make at this time is choosing your business entity. With significant financial and tax implications, making the right call is critical. Faw & Associates can help.

Wilkesboro NC Business EntitiesYour business entity, in large part, determines the amount of taxes you will pay and impacts other financial areas, such as securing loans and investor funding.

  • Sole Proprietorship. This is a simple solution in terms of taxes but leaves you with greater exposure to personal liability in the event another party takes legal action against your business.
  • General Partnership and Limited Partnership. These are also easy to set up and file taxes for: consider, though, that you will be held personally responsible for partners’ liabilities and debts. Additionally, limited partnerships are more costly to create the general partnerships and require state filings.
  • C-Corporation. You do not have personal responsibility for the business’s debts or liabilities, and you will have access to more tax deductions. The cost is higher to create a C-Corp than a sole proprietorship or partnership, and you will face double taxation. That is, you will be taxed via a corporate tax return, and shareholders will pay taxes on their dividends. There are also a host of legal requirements (e.g. shareholder meetings, board meetings, bylaws, etc.).
  • S-Corporation. You have limited liability but, unlike a C-Corp, you pass profits and losses through to your personal tax returns. There are formalities, as with C-corps, and you will have more stringent limits on issuing stock than with a C-corporation.
  • Limited Liability Company (LLC). LLCs offer limited liability protections without an onerous burden in terms of ongoing requirements. You may also choose how you want the IRS to tax your business (i.e. as a corporation or a pass-through entity).

There are benefits and drawbacks to each type of business entity. Trust Faw & Associates to help you make the right decision for your needs and goals. Contact us to get started.