Business Consultants in Orem, Utah
Selecting a Business Entity
Business formation, entity selection and incorporation doesn’t have to be complicated. We take the time to get to know your business so we can make a recommendation that fits your needs and minimizes your tax operations, forecasting, budgeting and strategic planning.
When making a decision about the type of business to form, there are several criteria you need to evaluate.
- Legal Liability
- Tax Implications
- Cost of Formation and Ongoing Administration
- Future Needs
What’s the bottom line? Don't take this very important decision lightly, and don't make a choice based on what somebody else has done. Carefully consider the unique needs of your business and its owners before settling on a particular business format. Know why types of formats are available to you.
Generally speaking, there are three basic types of legal entities in which business can be conducted: (1) Sole Proprietorship, (2) Partnership, and (3) Corporation. Within each category, there are several variations.
So now you are asking, “How does the Limited Liability Company fit into the three basic types listed above?” It is somewhat confusing but simply put, an LLC is legally set up within a state jurisdiction and is used to do just what it states, limit liability for its members. The IRS has determined that for tax purposes; If the LLC has only one member, it is considered a “disregarded entity” and reported on a Schedule C as a sole proprietorship. If it has two or more members, it is considered a partnership and reported on Form 1065, with net income reported to its partners on a Schedule K as flow-through income and thus claimed on the personal return on Form 1040. Thus, the advantages of this business format are that profits and losses can be passed through to owners without taxation of the business itself while owners are shielded from personal liability.
Of all the choices you make when starting a business, one of the most important is the type of legal structure you select for your company. Not only will this decision have an impact on how much you pay in taxes, it will affect the amount of paperwork your business is required to do, the personal liability you face and your ability to raise money.
At the outset, it is a good idea to discuss the best form of business entity with an experienced attorney and an accountant so that the advantages and disadvantages of all forms can be explored, explained, and discussed and the business can be set up properly and optimally from the start. In business, as in life, one size rarely fits all.
Let our experts help you understand all the implications of each entity formation and help you make an informed decision for the future of your business.
New Business Advisor
We can provide the services of a CFO or Controller without the cost of adding another employee to your payroll. We’ve helped countless businesses get a better handle on financial reporting, cash flow, business operations, forecasting, budgeting and strategic planning.