Entity
Structuring

A Comprehensive Guide to Structures and Support

In the U.S., there are several common entity structures that businesses can choose from, each with its own advantages and disadvantages. Here’s a brief overview of the main types:

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1. Sole Proprietorship

Example: A freelance design engineer operating under his/her own name.

• Overview: This is the simplest form of business entity, where the owner is personally liable for all debts and obligations. Profits are taxed as personal income.

2. Partnership

Example: Two friends opening a business together.

• Overview: A partnership involves two or more people who share ownership and profits. General partners are personally liable for business debts, while limited partners have limited liability but also limited control.

3. Limited Liability Company (LLC)

Example: A small family-owned construction company organized as an LLC.

• Overview: An LLC provides liability protection for its owners (members) while allowing for pass-through taxation, meaning profits are taxed at the members' personal tax rates.

4. Corporation

Example: A tech startup forming a corporation to attract investors.

• Overview: A corporation is a separate legal entity from its owners, offering limited liability protection. It can be taxed as a C corporation (double taxation on profits) or an S corporation (pass-through taxation).

5. S Corporation

Example: A consulting firm electing S corporation status for tax benefits.

• Overview: An S corporation allows profits to pass through to shareholders to avoid double taxation, but it has limitations on the number and type of shareholders.

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Choosing the Right Entity Structure

Selecting the appropriate entity structure for a business is crucial as it impacts taxes, liability, and operational flexibility.

Shapcott & Lauber can assist clients in this decision-making process by:

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• Assessing Individual Needs: Evaluating the unique circumstances of each client’s business, including goals, risk tolerance, and financial situation.

• Providing Expert Guidance: Offering insights into the benefits and drawbacks of each structure, including tax implications and liability protection.

• Customizing Solutions: Helping clients navigate legal requirements and paperwork to establish the chosen entity efficiently.

• Ongoing Support: Providing ongoing advice as the business grows and circumstances change, ensuring that the entity structure remains optimal for the client’s evolving needs.

By leveraging our expertise, clients can make informed decisions that align with their business objectives and protect their interests.