If you are looking to start a business, choosing the appropriate business entity can be confusing. When doing so, it is important to consider many factors such as 1) how to best protect your personal assets from the liability of the business; 2) how are the different entities treated from a tax perspective… which one provides the best tax advantages and are there multiple layers of taxation; 3) what are the costs to maintain, operate and file annually for each type of entity. Other things to consider are whether or not the entity is seeking to attract investors or if the entity wants to offer ownership interest to its employees. It is important to disuss the pros and cons of each type of entity with an attorney and tax professional, to weigh the advantages and disadvantages associated with each, and then choose the one that is best for you.
If your business will owned and operate by one person, you have the choice of forming a sole proprietor, corporation (C Corp, S Corp or Non Profit) or a limited liability company. If; howeverm there will be two or more owners you can not be a sole proprietorship and will need to consider forming corporation, limited liability company or a form of partnership.
Depending on your choice of entity, you will need to file documentation with the state to make your entity official and may need to file annually with the state to ensure you remain in good legal standing. Additionally, you will need to name your entity and obtain a taxpayer identification number specific to your entity. An attorney and tax professional will help and ensure that your entity is properly established and functioning in compliance with all applicable laws.