Choosing the Right Entity Type - Make Smart Decisions to Protect Your Liability and Tax Status
October 13, 2008
Dennis G. Egan, Jr., Esq.
So, which entity type is best for your company?
The short answer is: It depends. It depends on factors such as the assets to be held by the business entity, the number of employees, if any, employed by the company, the type of business to be conducted by the entity, whether the entity will issue shares of stock, and how many, just to name a few. Ask any attorney, and his first concern will be limiting the personal liability of the principals of the business. Ask any accountant, and her first concern will be preferred tax treatment. Fortunately, for current and would-be business owners, these two concerns are not mutually exclusive. In fact, the two principles can be combined in a number of different ways, depending on the individual needs of the business.
In addition to the two tax and liability concerns outlined above, other factors that must be considered when deciding which entity is right for your company include ownership structure, capital structure, management structure, ease and cost of formation, and exit strategies.
Sole Proprietorship
The sole proprietorship is the most common, cost efficient, and easiest to start form of business entity. To form a sole proprietorship in Massachusetts, one need only file a d/b/a or "doing business as" certificate in the Town Clerk's office of every city or town in which the sole proprietorship will operate. That said; none of these should be a determining factor when choosing which entity to form. In fact, a sole proprietor and his or her business are one in the same. That is, ...
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BusinessWest
October 13, 2008
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