Q&A: Business Entity Formation
by Andrea Coit
Q: I am opening a BBQ joint. What type of business entity should I form?
A: Consider a sole-proprietorship, a limited liability company or an S-Corporation.
A sole-proprietorship allows the greatest freedom and ease of creation. It does not, however, protect you personally from the company’s creditors.
An LLC is simple to form, offers the tort protections of a separate entity, and allows pass-through taxation. There are few reporting requirements, but transferability is limited.
An S-Corp is a corporation that has elected pass-through taxation with the IRS. An S-Corp protects the personal assets of its owners from the company’s creditors and allows for the sale of small shares through stock issuance. An S-Corp requires a board of directors, annual shareholder meetings, and corporate records.
Originally published in the Portland Business Journal.
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