"Which Business Entity Should I Use?"
Well, That Depends. . . .
That question is the one we are asked more than any other, and for a good reason: the answer is complex.
For instance, usually you would not want to be either a general partnership or a sole proprietorship (nevermind what they are for the moment), because they provide absolutely NO asset protection.
However, if you have a low risk business, and you want to pay your children who are under 18 to work in it, having either one of those business structures will save you lots of money in social security and employment tax on your children’s wages.
Many businesses would rather avoid the double taxation of being a C-corp. But if you plan to grow the business quickly and sell it, a C-corp will save you on capital gains tax. You can also deduct educational and certain other expenses in a C-corp that you can’t with any other business entity.
Most of the time, an LLC functioning as an S-corp ends up being the best structure for most businesses. But you really need to know much more than we can include in a site in order to make your decision.
The person I send everyone to for these sorts of questions is CPA-trained tax expert Wayne Davies. He’s been helping people with these issues for well over 20 years.
When you go to IM-TaxFree.com , you will see his offer for a very interesting, very inexpensive report on how to build tax-free income. After you purchase that for a pittance, you will see an offer for his comprehensive tool kit that will teach you TONS about the various business entities and the tax deductions you can claim that you probably don’t know about.
I recommend you get that tool kit. Along with it he gives you a free consultation, so you can have him help you decide what business entity you should use. And he will review your last three years tax returns for free, to see how much of a refund the IRS owes you.
Here’s that link again: IM-TaxFree.com
And when it comes time to set up your corporation, here are a couple of options to consider if you don’t have the $2k to spare for an attorney up front:
