Entity selection hinges on a number of different factors. It all starts and ends with limited liability and why it matters to you.
Even your compliance programs are important when it comes to limiting your liability.
The selection of an entity is an important decision that can have a number of effects on the continuation of your business. Proper planning on the front end can save you a fair amount of headaches in your business. Proper entity selection can be the difference between growing your business and making sure everyone is properly compensated for the growth of the business. The proper entity can do that.
Even if your choice is simply about creating flexibility.
Much of the decision you face in selecting an entity revolves around the investment you need for your entity and what your plans are moving forward. If you are okay with limiting the number of shareholders and paying everyone the same way, the S Corporation may make sense for you. However, if you know you will be raising money or need multiple classes of equity, the S Corp does not make sense for you.
This, again, is one of the places where the LLC has such an advantage. It is flexible. It can be adjusted to meet your needs at the time. I often tell clients that the LLC is a strong vehicle if you are unsure of what you need at the time. That is because you do not have to make any major changes at the time. The decision to alter the structure can be simply a numbers game without the hassle of creating a new company.
There are clearly a lot of decisions that need to be made before you ever even start your business. And there are a number of factors that need to go into your choice of entity for your business. Sometimes, an investment and tax structure can work in any entity, and the management structure is what matters for your business.