One of the most critical decisions you have to make as a small business owner involves how you intend to structure. Choosing the proper business entity—S Corporation, C Corporation, limited liability company (LLC), sole proprietorship or partnership, just to name a few—dictates not only how you build your company’s foundation, but will likely also affect your business planning down the road. Entity choice determines what type of liability protection your business enjoys, how profits pass through your business and how it is taxed, just to name a few. Certain entities also have upfront and recurring costs, which you need to be mindful of as your business grows.
As Klickly founder and CEO Cooper Harris explains, paying for your entity’s formation can put the squeeze on an unprepared budget. If you’re given the option, you may have to decide whether you’ll pay for it all at once, or gradually over time. You can try to save money and take it upon yourself by hiring a single attorney, or partner up with a larger law firm that specializes in launching new businesses. If you go the latter route, be mindful of how expensive it can be in the long-run, despite initial discounts and/or deferral fees.
You should choose the business entity that best enables you to realize your business goals. Incorporation isn’t cheap, however, so any money saved on this process could be reinvested in other areas of the business. But if you have the funds—as well as the need—for a more comprehensive and professional approach, just be sure to read the fine print, as ill-prepared deals of today can easily become the debts of tomorrow. With the proper research and planning, choosing the appropriate entity for your business can set the stage for future growth and prosperity.