Whether you already operate a small business or you’re an entrepreneur planning to launch a new venture, it’s important that you consider the type of business entity you open. Your business entity type comes with legal and tax implications, and if you choose the wrong one, you could open the door to personal liability and higher tax payments.
What Is a Business Entity
A business is an entity, but the type of entity makes all the difference. There are four to choose from:
- Sole Proprietorship: A sole proprietorship is an entity that describes a single person who sells products or services on a limited scale in their own name. Sole proprietorships offer limited tax benefits and little by way of liability protection.
- Limited Liability Company (LLC): An LLC acts as a tax pass-through. Although you will be able to take advantage of more write-offs with this entity than with a sole proprietorship, there are still significant limits to the tax protection it provides. However, LLCs do offer substantial liability protection.
- Partnership: Partnerships are businesses owned by two or more people. They can be LLCs or corporations, and the tax and liability implications depend on what type of partnership it is.
- Corporation: Corporations have the largest tax and liability benefits, but they’re only worthwhile if your company earns what many would consider significant revenue and profitability.
Launch Your Business With Clear Voice Business Solutions Today
The entity with which you choose to operate your business may prove to be a tax haven or a tax burden. The key is choosing the right entity to take advantage of the biggest tax perks possible for your type of business. Get in touch with Clear Voice Business Solutions today for entity review tax services and make sure you’re getting the most out of the entity you choose.