Which entity type is best for me?

Home FAQs Incorporate in Delaware Which entity type is best for me?

Which entity type is best for me?
2009.04.26

We are a service company and therefore we cannot give you any legal or tax advice.

Below are some helpful tips that should help aid in you in your decision.

A corporation is usually required if:

• The owners of the corporation plan to elect to become an S corporation.
• There will be several individuals or entities owning the corporation.
• The owners plan to be profitable in the first several years of operation and plan to reinvest profits for growth.
• The owners plan to look for investors to gain capital in the business.

A S corporation (S Corp) is usually appropriate if:

• The company will experience start-up losses during the initial years of operation and the owner has ordinary income against which these losses can be deducted.
• The company is a single-owner entity.
• The owner wants to extract most of the profits instead of reinvesting for growth.
• The company does not expect to issue multiple classes of stock or have more than 100 shareholders.

A limited liability company (LLC) is usually appropriate if:

• The business is a partnership, or several different entities own the business.
• The company is used primarily to hold real estate or other income-generating assets such as stocks.
• The company has foreign investors.

If you need any advice to choose the best company status please get in touch with a legal and/or accountancy firm.