The end of the year is only a few days away. Many of you may beginning to consider your options for tax strategies for the coming year. One tax strategy that is often overlooked is choosing what type of entity you use to run your business. This is because it may seem confusing or perhaps too time consuming. But choosing the right business entity can mean saving thousands of dollars each year. For example, we just counseled one of our clients who has been doing business as a Sole Proprietor to switch to an S Corporation because it would save them $3,000 every year. What would you do with an extra $3,000 a year?
There are several things to consider when choosing the right entity for your business. Here is a list of the different business entities and what they are good for:
- Sole Proprietor-good for a small or temporary business that doesn’t make a lot of money.
- Partnership-good for small or temporary business with multiple owners that doesn’t make a lot of money.
- Limited Liability Company or LLC-great for holding real estate and equipment.
- S Corporation-good for lowering tax liability and general liability for small businesses.
- C Corporation-good for very large companies and liability protection.
There is a lot to consider and we are not allowed to counsel you on what type of entity you should choose. This must be done with a lawyer. It’s not too late to switch to a different entity and to take advantage of tax savings. Contact us or your tax professional to see if they can help you find a lawyer and complete the procedure for the right entity.
If you want to learn more about what type of business entity might be best for you, click here.