Selecting a Business Entity

Kalish and EnviroTech co-owner John Berthold focused on the following areas when they chose the business format for their company:

As mentioned before, double taxation, a common disadvantage often associated with incorporation, can be avoided with S corporation status

1. Legal liability. To what extent does the owner need to be insulated from legal liability? This was a consideration for EnviroTech, says Kalish. He and Berthold had a hefty investment in equipment, and the contracts they work on are substantial. They didn’t want to take on personal liability for potential losses associated with the business. “You need to consider whether your business lends itself to potential liability and, if so, if you can personally afford the risk of that liability,” Kalish says. “If you can’t, a sole proprietorship or partnership may not be the best way to go.”

Carol Baker is the owner of The Company Corporation, a firm based in Wilmington, Delaware, that offers incorporation services. She points to the protection of personal assets as “the https://cashadvancecompass.com/installment-loans-ga/atlanta number-one reason our clients incorporate. In case of a lawsuit or judgment against your business, no one can seize your personal assets. It’s the only rock-solid protection for personal assets that you can get in business.”

2. Tax implications. Based on the individual situation and goals of the business owner, what are the opportunities to minimize taxation?

Baker points out that there are many more tax options available to corporations than to proprietorships or partnerships. Continue reading When making a decision about the type of business to form, there are several criteria you need to evaluate →