You have a great new product or service you can’t wait to present to the world. That’s awesome. But as a small business owner, it’s all too easy to get carried away by your inspiration. For inspiration to carry you to success, you need to give it some structure—the proper business structure, that is. Choosing a business structure—also known as a “business entity”—is one of the first steps in what will be a long and rewarding journey—so long as you choose the right one. After all, your entity determines how your business can be run, including how it’s allowed to raise capital and pay taxes. But between a C-Corporation, S-Corporation, sole proprietorship or partnership, how do you choose the right one? It depends on the kind of business you want to run.
As Luxelab co-founder David Abrams explains below, when it came to choosing a business entity, the proper choice for his business was an S-Corp. David and his business partner, Jason Lara, both felt that the entity’s pass through feature for incoming revenue was important for managing all of Luxelab’s locations. Since Luxelab has a number of specialty salons in Los Angeles, each of which is an independent S-corporation owned by David and Jason, the S-Corp’s structure would protect the business as a whole should a loss occur at any single location.