Understanding the key differences between entity types and how to choose the best structure for your business.
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The Importance of Entity Selection
Choosing the right business entity is one of the most important decisions you'll make as an entrepreneur. This choice affects your personal liability, tax burden, and how you can raise capital.
Understanding LLCs
Advantages
- Pass-through taxation – Profits pass directly to owners' personal tax returns
- Flexibility – Operating agreements can be customized
- Simplified compliance – Fewer formal requirements than corporations
- Liability protection – Members' personal assets are protected
Disadvantages
- Self-employment taxes on all profits
- Cannot issue stock to raise capital
Understanding Corporations
Advantages
- Equity financing – Can issue stock to investors
- Credibility – Perceived as more established
- Employee benefits – Stock options, retirement plans
Disadvantages
- Double taxation (C Corps)
- Must hold meetings, maintain minutes
When to Choose Each
Choose LLC: Small business, real estate, professional services, flexibility needed.
Choose Corporation: Seeking venture capital, employee stock options, planning to go public.
Need Help Choosing?
Goldstein PLLC can help you analyze your needs and form the right entity.
Schedule a Consultation