Choice of Entity Considerations

Choice of entity is a preliminary matter of considerable importance in forming your business. The entity ultimately selected will determine the manner of governance, the reach of employment taxes on owner-employees, single income taxation by election of a flow-through entity vs. double taxation (entity and owners) and the availability of tax-free reorganization (statutory mergers, spin-offs, consolidations and the like).

Generally, corporations, both regular “C-corporations” and the more prevalent “Subchapter-S corporations,” and the limited liability companies are the primary entities under consideration. However, a virtual alphabet of entities are available, including limited liability partnerships, limited liability limited partnerships and professional corporations.

Although addressing such issues at the early stages of forming a company may seem to be unnecessary, experience has shown us that changing later almost never occurs, even when facts warrant such change. And second, if the company does not prove successful, the ability to have the financial loss maximized for tax purposes may have been jeopardized, minimized or entirely lost.

Consultation with experienced business attorneys can help sort through the options available to achieve your objectives. Seeking out experienced counsel can help you achieve and secure your objectives. After all, it is more than just a choice of entity.

For more information, please contact David P. Weiss at 314.561.5078 or email him.