5 Tips for Forming the Perfect Company
Too many options!
Here's how to tell...
1. How many owners are there?
If you have one owner, you can form an LLC, C Corporation, or S Corporation.
If you have two or more owners, you can form a partnership, LLC, C Corporation or S Corporation
2. Do you sell products or services?
If you're selling products, it's especially important to have the limited liability protections of an LLC, C Corporation or S Corporation.
If you're selling a service, it may be a good idea to have limited liability protection, but you may also be safe with an insurance policy that covers your risk.
3. What kind of tax treatment do you want?
Sole Proprietorships, Partnerships and LLCs have similar tax structures that are easy to compute and file.
C Corporations have more complicated tax filings and regulations.
S Corporations can be very advantageous tax-wise, if you meet the minimum recommended income requirements.
4. Can you handle a formal management style, like a board of directors and record keeping requirements?
If you're looking to keep it easy, a Sole Proprietorship, Partnership, or LLC is the way to go.
If you can handle annual filings, fees, and record keeping, you may be able to handle a C Corporation or S Corporation.
5. Are you interested in investors?
Investors are mainly interested in C Corporations. There are certain cases and industries where LLCs are okay. And S Corporations may work for investors but keep in mind that it limits the number and nationality of investor options.
So how do you pick?
There's no right or wrong company choice. It's about which one is the best fit for your company goals. Think about which factors above are most important to you.