Choosing the right business entity for a successful new business -- or even an existing one -- isn’t too prevalent on many business owners’ minds. However, selecting the right structure is important for many reasons.
For starters, the business structure you select can have a big impact on your business strategies, growth objectives, mergers or acquisitions, sales, tax planning, and employee incentives. Choosing the wrong business structure could cost you in taxes, exit planning opportunities, and capital growth.
The four primary business structures are C Corporations, Partnerships, LLCs, and S Corporations.
I’ve worked with many small- and mid-sized businesses on choosing the best entity and can tell you that understanding the main differences of each structure is the foundation of making a correct decision.
It is one of the reasons we devoted a section in CBIZ MHM’s 2012 Business Tax Planning Guide to choosing a business entity. Specifically, we created the handy chart below that compares some of the main characteristics and differences in key business planning areas.
In future posts, I’ll continue our discussion of choosing the right business structure. Next up, I’ll delve into Partnerships, LLCs, and S Corps -- that blog post will explain the advantages and disadvantages of each.