The site that helped me decide is Dane Carlson's Business Opportunities Weblog. Read this post about deciding business structure. Why is it so important to decide the structure? A little extra effort in deciding the right structure goes a long way for your business. There are five main structures a business can go for in US, namely C-corporations, S-corporations, limited liability companies, sole proprietorships, and partnerships. Each has it own merits and demerits, which you can find on Dane's blog. I have selected my business structure as C-corporation.
My reasons for selecting a C-corporation structure are as follows:
- Keep personal and business entities, hence liabilities separate.
- Easier structure when I have to raise capital
- Provides a much better image to conduct business (my personal thought)
- Structure gives flexibility to deal with employee benefits, when common shares are to be issued or when stock options are to be given to employees.
- It is easier to conduct business in all states as laws regarding C-corporations are settled in all states.
There are few cons in forming a C-Corporation, but they are minor compared to the benefits. I have listed the cons just for your reference:
- The corporation's income is taxed at the corporate level. Then when you distribute earnings to the shareholders via dividend, the shareholders include the dividend in their taxable income and are all taxed on that income again. This is commonly referred to as double taxation.
- Increased administration costs to maintain separate books of accounting.
Depending on your individual situations, other forms of business structure may be appropriate for you. Do consider professional help to suggest what is good for your type of business.
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