S Corp‚ C Corp‚ LLC? What is the Right Entity When Starting a Business? | Franchise Law Blog

S Corp‚ C Corp‚ LLC? What is the Right Entity When Starting a Business?

Choosing Between "S Corp"‚ "C Corp" and "LLC"

Understanding the Differences

If you are starting a new business or buying an existing business or franchise one critical issue that you will decide on will be what corporate entity to utilize.  Assuming that you have already made the wise decision to own and operate your business through a corporate entity (as opposed to individually owning and operating the business) your choice will‚ typically‚ be one of three options‚ that is:

(a) Establish a "Limited Liability Company";
(b) Establish a "S Corporation"
(c) Establish a "C Corporation"

You decision as to which corporate entity would be best for your business will require a detailed discussion with both your accountant and business lawyer  as to the "legal" and "tax" advantages/disadvantages of each entity.  While the small business owner typically proceed with "LLC's" or "S Corporations" (because both involve "pass through" tax treatment) there are nevertheless instances where a "C Corporation" may be the best vehicle.

The potential utilization of a "C Corporation" is typically overlooked and not the topic of much discussion.  However‚ Wall Street Journal Small Business Editor Colleen DeBaise does a good job of raising this issue in her "Small Talk" column and discussion with accountant Michael Hanley at WSJ.com.

Selecting the Appropriate Corporate Entity

Selecting the appropriate corporate entity will require an "individual" assessment of your personal finances‚ the type of business you are starting‚ the required capital expenditures and projections of profits and potential shareholder dividends. Your decision will have "tax implications" for may years to come – take the time to decide on the right entity.

Additional Information About C-Corps‚ S-Corps and LLC's

For additional information about selecting the appropriate corporate entity contact us

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Category: Business Transactions

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