What entity structure should I be?
The question that countless business owners ask themselves. However, there is not a one-size fits all answer. Rather – owners should evaluate the pros and cons of each.
Sole Proprietorship
Pros
- Easy and cheapest to set up (<$50)
- Avoid franchise tax (~$800/yr)
Cons
- Virtually no liability protection
- Unable to optimize cash flow through business deductions
- Full Self-Employment Tax
LLC
Pros
- Low formation cost (<$100)
- Personal asset protection
- Cash flow optimization through business deductions
Cons
- Full Self-Employment Tax
- Subject to franchise tax (~$800/yr)
S-Corporation
Pros
- Minimize self-employment tax → overall tax
- Personal asset protection
- Cash flow optimization through business deductions
Cons
- Need to run payroll for employees
- Subject to franchise tax (~800/yr)
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