Business Entity Formation

Helping You Make Smart Choices for Your Business

Building your business requires making tough choices every single day. One of the fundamental decisions all business owners must make and one that can have a profound and lasting impact on the success of your enterprise is how to structure your business.

At FitzGerald Kreditor Bolduc Risbrough LLP, we believe choosing the right entity for your business can maximize your tax benefits and provide protection from personal liability.

The biggest mistake people make when forming a business is not choosing the entity that can meet their business needs. What works for one business may be a disadvantage to another, depending on the type of business, the number of employees, the potential tax liability, and the need for pension and 401k plans.

Assistance With All Types of Entity Formations

We will explain the relative advantages and disadvantages of each entity structure, helping you choose the entity formation that is best for your business.

• C-Corporation: A C-corporation is the standard corporate form. Unlike partnerships, corporations generally offer personal liability protection from business debts and liabilities but must obey certain formalities.

• S-Corporation: An S-corporation is so-named because it is defined in Subchapter S of the Internal Revenue Code. S-corporations share almost all of the benefits of C-corporations but are taxed similar to partnerships, in that the entity itself is not taxed on gains. However, S-corporations can only have up to 100 shareholders, all of which must be individual U.S. residents or certain trusts, among other restrictions.

• Limited Liability Company (LLC): A limited liability company is a business entity that operates under state law; every state has a statute authorizing LLCs. Generally, members of an LLC are protected from business debts, just as in a corporation. LLCs also allow businesses great flexibility in distributing profits and losses. While LLCs are typically taxed like partnerships, they can elect to be taxed as a corporation.

• Partnership: Partnerships are among the easiest business entity to form and manage as they involve few or no structure or reporting requirements to exist. General partners in a partnership, however, are personally liable for the debts of the business. The partnership itself does not pay taxes on earnings, but individual partners must report their share of profits or losses.

There are also several relatively new corporate forms that are available in California and several other states in similar iterations, but not in every state where you may incorporate your business:

• Flexible Purpose Corporation (FPC): FPCs combine the for-profit abilities of a corporation with the social mindedness of a non-profit corporation. An FPC must specify at least one “special purpose” in its charter and the Board and management will be protected from shareholder liability when considering their special purpose against shareholder value.

• Benefit Corporation (“B” Corporations): Each Benefit Corporation must provide a general positive benefit and specifically, a material positive impact on society and the environment. This entity may also pursue a more specific public benefit alongside its general positive benefit. A Benefit Corporation will require a company to consider society, the environment, and its shareholders when making decisions.