There are several types of entities under which business assets can be owned and operated. The major three are: (1) Limited Liability Companies, (2) S Corporations, and (3) Regular corporations. Limited Liability Companies and S corporations are similar. This section provides guidance for comparing Limited Liability Companies and S corporations, highlights some of the “ideal” circumstances for each entity, and provides general rules as to when to avoid one of the three…just click the entity title.
No matter the legal entity which an owner chooses to operate his business, there will be some disadvantages. A proper analysis projects the future and compares the advantages with the drawbacks. Generally, most small businesses with one or just a few owners should operate as either a Limited Liability Company or S Corporation. There are many instances where a Regular Corporation best suits the owners though. General partnerships should be avoided; and, only the very smallest of businesses should not at least be single owner Limited Liability Company.
Buying, selling, or starting a business is one of the most exciting events for entrepreneurs. Many hours, and possibly years of thought have gone into the decision. Numerous questions have been asked and analyzed. Is this the right time for my organization or me? Is the price fair? Can I afford to sell? Will the business make sufficient profits? Is the person I am dealing with trustworthy? What are the tax consequences? Should I operate as a corporation or limited liability company? The questions go on and on and the answers are not always certain. To reduce that uncertainty, a checklist should be developed. The following sections provide a starting point for such a checklist.