Posted on Apr 20, 2018
If you’re a business owner, one of the first questions to ask yourself is whether or not you should incorporate.
The biggest advantage of incorporating is that it limits your legal liability. Your responsibility for debts and other liabilities incurred by a corporation is generally limited to the assets of the business. Your personal assets are not usually at risk, although there can be exceptions to this general rule. The trade off is that there is a cost to incorporate and, in some cases, tax consequences.
So, should you incorporate?
Truth be told, you might not need to incorporate. Depending on the size and type of your business, liability may not be an issue or can be covered by insurance. If so, you could join millions of other business owners and operate as an unincorporated sole proprietor.
If you do decide to incorporate, you’ll face a choice of corporate forms. All offer limitation of your liability, but there are differences in tax and other issues. Take a look at the options:
S corporations have some ownership limitations. There can only be one class of stock and there can’t be more than 100 shareholders who are U.S. citizens or U.S. residents according to tax law. State registered LLCs have become a popular choice for many businesses. They offer more flexible ownership rules than S corporations, as well as certain tax advantages.
Whether you’re already in business or just starting out, choosing the right form of business is important. Even established businesses change from one form to another during their lifetime.
Call our office (and your attorney) for guidance in selecting the form that is best for your business.
Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and Twitter.