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Choosing the Best Structure for Your Startup Business


Choosing the Best Structure for Your Startup BusinessAuthored by Richard Mayer

If you are a new entrepreneur looking to get your business off the ground, then one of the first decisions you need to make is how you will form your company and the right structure for your needs. The National Customer Service Association understands the weight of this decision, so we would like to present some of the more common business structures and the benefits of each so you can make the best choice for the future of your company.

The Benefits of a Limited Liability Corporation

A structure that many beginner entrepreneurs consider is the limited liability corporation. An LLC offers many great benefits for someone who is still learning the ropes of business because it provides a lot more flexibility, less paperwork, and great tax advantages. When you are starting a business, you need all of the money you can get, and getting some cash back at tax time can be a real lifesaver.

The downside of starting an LLC is that you need to be very well versed in the rules of your state because if you do not stay in compliance, then you could find yourself in legal hot water and be in trouble before you start. Experts recommend contacting a formation service to help you along because they know all of the rules and guidelines, and they can ensure that you are in a good position going forward.

The Sole Proprietorship

According to census data, 73% of entrepreneurs start their businesses as a sole proprietorship. This is a very common structure because it requires no legal structure to form, and it is very easy to operate going forward. This arrangement is also beneficial because the tax preparation is simplified, and all that you need are the proper licenses and permits to get started. The downside is that there is a lack of liability protection. Plus, this arrangement does not provide any legal protection. All of these reasons are why a sole proprietorship is best for freelancers and independent contractors. If things get more complicated, then you may want to try one of the other business structures.

Since you will need to keep track of your own permits and the paperwork for your business, it is a good idea to combine all of those documents into one PDF file so you can edit them without a lot of fuss. Start by uploading all of your paperwork into the computer. Then, you can compile everything into one file. As time goes by and you need to make changes, you can edit PDFs by using an online tool. Simply upload your documents, make the necessary changes, and then download it when you are done. You don’t even need to change the file format.

Then There Is the S Corporation

The other major business structure is the S corporation. In order to become an S corp, you will first need to incorporate as an LLC. After that, you will need to work with the IRS to get a special election. Since the business operator draws a salary from the business’s profits, you also get great tax benefits. Also, dividends are taxed at a lower rate than income, which can reduce your annual tax liability. On the downside, running an S corp is much more complicated than the other arrangements, and you will want to talk to a tax advisor before you get started.

As you can see, there are several different options that you can choose for your next company. Think about the benefits of an LLC and the ease of sole proprietorship, and decide if an S corp may be the answer. Whatever you do, make sure to keep your documents organized along the way. If you would like to learn more about the National Customer Service Association, please contact us at info@nationalcsa.conm or by phone: 866-315-6272.