Should I start a Sole Proprietorship, LLC or Corporation?
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Should I start a Sole Proprietorship, LLC or Corporation?
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Asked on February 14, 2018 under Business Law, Maryland
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 6 years ago | Contributor
Definitely not a sole proprietorship: a sole proprietorship offers NO protection to business related debts or liabilty.
Definitely not a C-corp: they are subject to "double taxation" in that the corporation pays taxes on profits, then the owner(s) pay when they take the money out. C-corps have advantages for *large* compies, but not a small (or one-person) one.
Between an S-corp and an LLC: both offer the same protection to most business-related debts and liability. (It's not 100% protection, and there are some debts/liability you are exposed to, but it is considerable protection). Both give you the same "pass through" tax treatment--and IMPORTANT: under the new Trump tax plan, you get an instant tax deduction on income from an entity like this (speak to a tax preparer or CPA for more information). An LLC involves less paperwork and formalities, and if you ever bring in a partner, gives you flexibility about assigning profit vs. control over the business. An S-corp makes it easier to "sell" an interest in the business to later investors or partners. So pick LLC unless you strongly anticipate selling shares down the road.
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