Choosing the Best Business Structure
Question: I am starting out as an ad specialty distributor and am a sole proprietor. Is this a good business structure for me?
Answer: I advise you to check with your CPA and attorney regarding your choice of business structure. Generally speaking, there are four options:
- Sole Proprietorship
- LLC (Limited Liability Corporation)
- S Corporation
- C Corporation
The Sole Proprietorship is the simplest, but it offers no legal protection. Should there be a problem with an order (e.g., a food or injury issue) and you are sued, the person or entity suing you can go after your personal assets and the business assets, too.
The other three options involve a limited liability meaning that should you be sued, only your business assets are at risk. An LLC is a somewhat newer form of business organization that affords legal protection and has your business income flow through your personal income tax returns. The S and C Corporations are more traditional forms of business organization and involve filing income taxes just for your corporation, as well as filing your personal tax returns.
Only a professional can evaluate the pros and cons of each form, and the implications of each can be significant.
Please email accounting questions you would like considered for the column to firstname.lastname@example.org with the subject line of "Ask the Accountant."
Harriet Gatter, owner of Accounting Support LLC, was an ad specialty distributor for 23 years and an adjunct professor of accounting at Neumann University. She sold her ad specialty business in 2012, became certified as a QuickBooks ProAdvisor, and now works exclusively with ad specialty distributors nationwide on their QuickBooks, order management and accounting needs.