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Selecting Your Business Entity

Kairi the Attorney

It’s very important to select the appropriate way to structure your business. The way you structure your business entity has tax consequences and also determines how you will be required to report your tax information to the IRS. The different types of business entities include: 

  • Sole Proprietorship

  • Limited Liability Company/Partnership or LLC /LLP

  • Corporations or INC 


Sole Proprietorships

Sole Proprietorships are a business extension of you personally. No new entity has to be created, there’s no financial separation between you and the business, and your business operates under your Social Security Number or Taxpayer Identification Number.


Limited Liability Company (LLC) or Partnership (LLP)

Limited Liability Company or Partnerships (LLC/LLP) are not an extension of you or your partners, meaning that a new entity has to be created. Because of the creation of this new entity there is financial separation between you or partners and the business entity. You or Partners own the business entity and the ownership interests in said entity is fixed. When operating as an LLC or LLP your business operates under an EIN (Employer Identification Number) 


Corporations

Like LLC or LLPs, Corporations are also not an extension of you or your shareholders, meaning a new entity must be created and the business will operate under an EIN number. There is a financial separation between you as a shareholder and the business entity. You ownership of the business entity is fluid and based upon the number or percentage of shares owned.


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