Traditionally, the divide between a for-profit or nonprofit organization was clear: for-profit businesses would engage in revenue generation and nonprofits would engage in charitable work to solve social issues and would largely stay away from revenue generation. The rise of social enterprises in recent years, however, has made that distinction less and less clear. Social entrepreneurs are finding innovative ways to challenge the traditional thinking about nonprofit organizations (by focusing on economically sustainable models) and for-profit businesses (by focusing on solving social issues). As you set out on your mission to change the world, you will have to decide if you want to form your venture as a for-profit or nonprofit–or perhaps some hybrid of the two. The answer will largely depend on your best guess as to source of funding and your activities.
S-Corporations are not technically a distinct entity type. Rather, the term “S-Corp” refers to a type of tax treatment available to corporations and LLCs that meet certain requirements. When a corporation makes an S-Corp election, it will avoid double taxation, which is often viewed as the primary disadvantage of creating a corporation (i.e. a C-Corp). Instead, the corporation will enjoy pass-through taxation. In the context of LLCs, the choice to be taxed as an S-Corp can allow the owners to lower their tax liability in certain situations. To elect to be taxed as an S-Corp, a company must meet strict requirements. These requirements, as well as a brief overview of how an S-Corp election impacts the 4 factors to consider when choosing a business entity, are described below. Read more
The C-Corporation is the default corporate form, meaning when you incorporate your enterprise as a corporation, you are automatically classified as a C-Corp in the state where you incorporate. The C-Corp is generally considered the preferred entity type for businesses that seek funding from sources such as angel investors and venture capitalists. But the tax treatment of C-Corps is often considered the main disadvantage of forming a C-Corp. Additionally, there are significant formalities that must be followed for C-Corps. Below is a description of the C-Corp form in terms of the 4 factors to consider when choosing a business entity. We encourage you to read this article if you are deciding whether you should incorporate your business in Delaware or California. Read more
The limited liability company, or LLC, is a relatively recent addition to the menu of options available when choosing a legal entity. It is a hybrid between a partnership and a corporation, designed to combine the benefits of both. In short, an LLC enjoys the taxation and governance advantages of partnerships while also providing limited liability to the owners similar to a corporation. Below is a description of how an LLC fares in the 4 factors to consider when choosing a business entity. Read more
We are often asked “what is the best entity type?” There really is no one-size-fits-all answer because each entity may be more or less beneficial for any given enterprise. Rather, it is important for entrepreneurs to consider various factors when choosing a business entity. Read more
Although it is possible to conduct business as a sole proprietor or general partnership without any formal incorporation, it is generally a good idea to incorporate a business as a corporation or LLC. There are a few reasons why creation of a corporation or LLC is important. Read more