Entity formation & structure
The structure decided on the numbers, then formed properly.
Choosing between an LLC, an S corporation and a C corporation, making the elections on time, and setting the business up so the structure still works in three years.
The decision, then the paperwork
Forming the entity is the easy part. Choosing the right one, and electing correctly, is where the money is.
Many owners arrive having already been told what to form: usually an S corporation, often by someone who did not look at their numbers. Sometimes that is right. Often it is premature: below a certain level of profit the payroll cost and the additional return outweigh the self-employment tax saving, and the answer is to wait.
We run the comparison on your actual expected profit, then form what the numbers support. Where an election is involved, the deadline matters as much as the choice. A late S corporation election can be fixed, but it is easier not to need fixing.
What is involved
Entity comparison
LLC, S corporation and C corporation modeled against your expected profit, not a rule of thumb.
Formation
State filing, EIN, and the organizing documents the entity actually needs.
Tax elections
S corporation election, entity classification, and fiscal year choices, filed within the deadlines that apply.
Multi-owner arrangements
How profits, distributions and basis will work between owners, agreed before it becomes contentious.
Foreign owners
Structures with a non-US owner carry reporting obligations from day one. See our Form 5472 service.
Getting operational
Payroll registration, accounting setup and the first year of estimates, so the structure is used correctly.
Frequently asked questions
Should I form an S corporation?
It depends almost entirely on your profit, not your revenue. An S corporation saves self-employment tax on distributions but costs payroll administration, a separate return and a defensible salary. Below roughly the level where the saving exceeds those costs, it is a net loss. We run the comparison on your numbers before recommending it.
I already formed an LLC. Can I still elect S corporation treatment?
Usually yes. An LLC can elect to be taxed as an S corporation without changing its legal form. There are deadlines, and late elections have a relief procedure that works more often than people expect, but it is worth doing on time.
Does the state I form in matter?
Less than the internet suggests. Forming in a state you do not operate in generally means registering as a foreign entity in your actual state anyway, so you pay twice and gain little. There are real reasons to choose a particular state, but tax savings for a small operating business is rarely one of them.
What if a non-US person will own part of it?
That changes the analysis significantly, and it triggers federal reporting obligations that carry a $25,000 penalty if missed. An S corporation is generally not available. Raise it at the start rather than after formation.
Can you handle the filing itself, or only the advice?
Both. We do the state filing, obtain the EIN and make the elections. What we will not do is form something we do not think you should have.
Worth a conversation before you file anything
The comparison takes about twenty minutes and it is the part that decides whether the structure pays for itself.