StartUp: Selecting a Business Entity Type

Before figuring out what is best for you from a tax and accounting perspective, you should initially address entity type with your attorney. There are lots of options from sole-propietorships to limited liablity corporations, S- corporations and C-corporations. I suggest you fully investigate all of your options before you make your final choice.

LLC’s need very careful scrutiny, because in California there is a fee assessed on Gross revenue and not on net profit.   This fee is in addition to the minimum California corporate tax of $800.00 and is illustrated briefly as follows:

• Less than revenue of $250, 000  the fee is $0
• Between $250,000 and $499,000 the fee is $900
• Between $500,000 and $999,999 the fee is $2,500
• Over $1 million of gross revenue, the fee is $6,000

 I find that most small businesses are best served by electing an “S” corporation.

 There are many other aspects to suitability and choice of entity that I would recommend your discussing with a tax professional.