BUSINESS CONSIDERATION: SHOULD I CHANGE MY ENTITY TYPE?

by | Mar 16, 2021 | News

BUSINESS CONSIDERATION: SHOULD I CHANGE MY ENTITY TYPE?
At some point in your business you migh proprietorship or partnership. But as owners of these businesses expand their services or add employees, they potentially open the door to more legal issues, because they are not separated from their business. At this point, it may be a good time to explore the benefits of forming a Limited Liability Company (LLC) or a corporation to lessen personal liability.

  1. Tax Benefits

Another reason for considering changing your legal entity type is because you want to get the optimal tax situation for your business. In a lot of cases owners change their business from a pass-through entity to a corporation. A pass-through entity is a type of business wherein the business doesn’t pay income tax, instead the owners pay the taxes through their personal tax returns. So consider you might need to think about what tax pros and cons you will get if you decide the change.

  1. Business Inter-State Expansion

If you are extending your operations into another state beyond, you might need to create a domestic business entity or foreign qualification in the new state. There are states that require “out-of-state” businesses to register to protect consumers.

Most states will require you to form an entity or foreign qualify there if you are “doing business” in their jurisdiction, specifically:

t find yourself wondering if you’ve outgrown the entity type you initially chose.

How can you determine whether your current business structure still serves you? In this blog, I’ll share important considerations business owners should think about when considering changing entity type.

  1. Owner Protection

Many startups and small businesses begin as sole

  1. Your business has a physical presence in the state.
  2. Your business is conducting in-person meetings with clients or customers in the state.
  3. Your business has employees living or working in the state.

 

  1. Changes in Ownership

Having owners leave or retire, may suggest a change in the business structure in order for it to carry on after they are no longer a part of it. For example, by forming a legal business entity, like an LLC or Corporation, owners can choose to sell or transfer ownership of their companies. So if you are thinking of changing your entity type for this matter, you can book a free consultation with us.

Need more advice? Levine and Associates offers Business Consulting, Bookkeeping, Corporate Taxes, Individual Taxes, Payroll Services, CFO/Controller, and Entity Formation Services for Americans in all 50 states.

Book a free consultation with us here.