Frequently Asked Questions

What are the advantages and disadvantages of choosing a business entity for starting a business?

Choosing a business entity is a crucial step in starting a business. The decision between an S corporation and a C corporation can have significant implications for the business's future. The advantages of choosing a C corporation include the ability to have an unlimited number of shareholders, making it ideal for businesses planning on growing and seeking more investors. C corporations offer more flexible stock options and profit sharing structures than other entities. They can also carry losses or profits into following years, reducing tax burdens and keeping earnings in the business. Furthermore, C corporations are ideal for business owners planning on selling their interest in the business, as stock ownership is fully transferrable. However, the primary disadvantage of C corporations is the issue of double taxation. The corporation is taxed, and shareholders are also taxed when they receive dividends. This can make the C corporation entity form untenable for many smaller businesses.