Choosing your business formation can be a daunting task. Should you choose sole proprietorship, S-Corp, LLC or something else? It’s a decision that will give you a headache in a heartbeat. If you’re not familiar with each of these business formations, here’s a brief rundown.
Sole Proprietorship: This is the easiest type of business formation. You hang out your shingle and start doing business (there may be local licensing requirements). The drawbacks of this type of business form is that the business is not separate from you, the owner. That means you could be personally affected if someone becomes unhappy with your business.
S-Corporation: This is named after the Subchapter S of the Internal Revenue code. An S-Corp is a simple type of corporation that protects its principals from personal liability. The corporation is not taxed, all profits (or losses) from the business pass through to the shareholders tax returns. S-Corps require some formal filings to remain valid.
Limited Liability Company: An LLC is a company form that also allows limited liability to its owners but has the option of being taxed as another business form. It typically requires less formal paperwork to maintain its status as an LLC.
Note: You can find much more detail on these business forms at Wikipedia and at the IRS website.
Given the variety of possibilities for business formation, what do you do? First you’ll want to do your homework and decide which type will work best for you. Then you need to contact a company that can get you set up properly. In the past, it was necessary to contact an attorney who could get all of this set up for you. In 1996, when my company was formed as an S-Corp that’s what I had to do. costs ran just under $1000 to get everything completed.
But today, there’s another option. One online provider for forming your corporation or LLC is MyCorporation.com. Created by a Intuit, a trustworthy company that also makes QuickBooks, MyCorporation can help you quickly determine your business type and get you set up for much less than I paid several years ago. They offer lots of helpful information on their website to help you determine what structure will be best for your business.
Although I haven’t personally used this service, I’ve been hearing rave reviews. And that doesn’t surprise me coming from an Intuit company. I’ve placed my trust in their QuickBooks product since I began my business and they haven’t disappointed. I have the same high level of expectations for MyCorporation. Check them out and see if they can solve your business formation problems for you.
Have you tried them out? Please leave a comment.
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A small business owner since 1996,
November 10th, 2008 at 8:43 pm
“An LLC is a company form that also allows limited liability to its owners but has the option of being taxed as another business form.”
Denise, does this mean I can switch my s-corp to an LLC and save money on taxes?
Jim Labadie
http://JimLabadie.com
Twitter: deniseoberry
Says:
November 10th, 2008 at 9:10 pm
@Jim — Not necessarily, but an LLC typically requires less maintenance from a federal / state paperwork perspective and the fees are typically less than maintaining an S-Corp. As an S-Corp, your company has certain requirements for corporate minutes, annual filings and tax returns that aren’t required as the LLC business form. Here is some additional info on the comparison between the two business forms – http://www.toolkit.com/small_business_guide/sbg.aspx?nid=P12_4710 You should check with your accountant to see what is the best bet for your company.
November 21st, 2008 at 1:32 am
If you have been thinking about starting your own business, now is the time. It’s no secret that the economy is going through some difficult times, but entrepreneurs with good ideas and the desire to succeed can help turn our economy around. Deborah Sweeney, General Manager of MyCorporation explains “We’ve been successful throughout the ups and downs of the economy over the last decade. We know that small businesses are key to driving economic growth, from the creation of jobs, to stimulating commerce. Right now, MyCorporation has the opportunity, and we welcome the responsibility, to give back to the business community and drive our nation back to prosperity.”