Choosing the

Entity that Suits

your Business
Needs
Start Up Businesses

Which Entity shall I choose?

What Meets your Needs BEST?

 Four basic entity types you can
choose
1. Sole Proprietorship is the simplest of all legal
structures but they also lack many of the legal and financial
protections of other business forms.
2. General Partnership involves two or more owners
carrying out a business purpose.
3. Sole Corporation
4. C Corporation, and
5. Limited Liability Company is a business structure that
has features similar to both corporations and partnerships.
 Comparison among the entity
Business Form Pros Cons

Sole Proprietorship -Easy to set up -No personal limited

liability protection
-No double taxation
-You pay twice the
-Income reported on amount of Social
personal income tax Security/Medicare
return taxes as you would as
an employee
-Taxes paid on income
of the business and not -No life insurance
on business as an deduction; partial
entity. health insurance
deduction
Partnership -No double taxation -No personal limited
liability protection
-All income is taxed (unless a limited
proportionately to each partner in a limited
of the partners who partnership
report it on their
personal tax returns
S Corporation -S Corporation may -S Corporation may
elect to be treated as not have more than
a partnership for seventy-five
federal tax purposes shareholders
with shareholders
reporting their share -Shareholders and
of the corporation's those owning 5
separately listed percent or more in
items of income, stock have limited
deductions, loss, and employee benefits
credit on their
personal tax returns

-Shareholders have
personal limited
liability
 -Shareholders have -Double taxation-the
limited personal liability corporation pays taxes on
its income and the
C Corporation -Health insurance shareholder pays taxes on
premiums and group life dividends
insurance up to $50,000
in benefits are fully -Shareholders cannot
deductible by the deduct the losses of the
corporation and not corporation
taxable to the
employees

-The corporate tax rate

doesn't go as high as the
individual rate (what a
sole proprietor or
partner would pay on an
individual tax return)
 Personal limited liability -Active members are
of members subject to
LLC’s self-employment tax for
-No double taxation Social Security and
Medicare
-May have more than
seventy-five members -Limited liability
companies are a
-Under IRS relatively new business
"check-the-box" rules a form and the laws are
limited liability company still evolving
may choose whether to
be taxed like a
partnership or a
corporation
 SIMILARITIES
❖ In S Proprietorship and G Partnership- Less paperworks,
No need to raise capital, No separate credit, No Asset
Protection and their is a Lower audit.
❖ In LCC’s, S Corporation and C Corporation- all are legal
entities that has protection from law and all have
benefits of Asset protection, Limited Liability, ability to
raise capital, separate credit and lastly Tax Benefits. Its
disadvantages are its expensive and a lot of paperworks.
❖ In S Corporation and C Corporation- I needs to hold an
Annual meeting.
 The type of business entity you choose will
depend on several factors such as liability,
taxation and record keeping; but the key is to
find the best fit for your organization. You
should also consult different professional for
advice if what structure is best suited with
your type of Business.