BUSINESS

Starting a business is exciting—new ideas, fresh notebooks, maybe even a Pinterest board. But before you start designing logos or buying that standing desk, we need to talk about something a little less glamorous: your business entity. Don’t roll your eyes. I know it’s not the fun part, but choosing the right structure can impact your taxes and your ability to grow. And if you get it wrong? It’s a pain (and sometimes expensive) to unwind.

What Even Is a Business Entity?

Your business entity is the legal structure that defines how your business exists in the eyes of the law and the IRS. It affects how you; ‘re taxed, how you pay yourself, what happens if someone sues you, and how fancy your financials need to be. There are a few common options for first-time entrepreneurs:

1. Sole Proprietorship (a.k.a. “I’m just doing my thing”)

What it is: You, as a person, are the business. No formal registration beyond your license.
Pros:
– Easy and cheap to start
– No separate tax return (you file on your personal return)
Cons:
– No separation between business owner and business
– Not ideal if you’re trying to build a legit business with assets, employees, or risk
When it’s okay: You’re testing the waters or freelancing with low risk.

2. Limited Liability Company (LLC)

What it is: A legal structure that protects your personal assets but still gives you flexibility.
Pros:
– Limited liability protection
– Flexible taxation
– More legit in the eyes of banks and partners

Cons:
– Slightly more paperwork and fees
– Doesn’t save you much on taxes until you’re making real income
When it’s great: You want to start strong and protect yourself, but you’re not ready to
complicate your life.

3. S Corporation (S Corp)

What it is: A tax election that lets you pay yourself a reasonable salary and take the rest as
distributions.
Pros:
– Can save thousands in taxes if you’re netting $50k+
– Looks polished for investors, lenders, and biz partners
Cons:
– Requires payroll, bookkeeping, and corporate minutes
– You must pay yourself a reasonable wage
When it’s smart: You’re growing fast, already profitable, or want to play it like the pros.

So… What’s Best?

If you’re like most first-time entrepreneurs we work with, you’ll likely fall into one of two
camps:
– Testing the idea: Start as a sole proprietor or LLC.
– Committed to growing: Start with an LLC, then elect S Corp when the timing is right.
We usually recommend forming an LLC out of the gate—it gives you flexibility, credibility,
and protection. Then, when the profits start rolling in, we can revisit the S Corp
conversation.

Real Talk: Don’t DIY If You’re Guessing

You’re already wearing 14 hats as a new business owner—CEO, marketing department, customer service rep, and unpaid intern. Don’t add “tax law expert” to the pile if you don’t have to. If you’re still unsure which path makes sense for you, that’s what we’re here for. We help clients like you map this stuff out clearly—without the jargon, without judgment, and without 20-page IRS downloads. Need help figuring out what’s best for your business? We’ve got you.