What business entity to file?

[amez1974]

My husband and I are opening a ladies boutique. He works full-time and so I will be running the store. Eventually we may hire a part-timer, that will be down the road. I've read the benefits of each entity and I'm curious on how others might file their business entity and why. Sole proprietorship, Corporation, Partnership, Limited liability companies? We are torn between the Sole Proprietorship and the LCC--I'm waiting to hear back from an accountant, but figured I would also get some feedback from you guys.
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[turboguy]

My vote would be for the sole proprietorship. My reasoning is that it is the cheapest and easiest to set up and when starting a new business stretching your cash is important. Once the business is running and profitable you could always convert it to an LLC or S Corp. The other factor that leaned me in that direction is the type of business you are planning. An LLC or S Corp will shield your assets but it doesn't strike me as a business that would be likely to be sued for any large amount that would not be covered by insurance and should you need a big bank loan they are going to ask for a personal guarantee anyway.

[Gustav-Dam]

LLC is simple, short and and easy so i would recommend it, @turboguy has discussed benefits of sole proprietorship. take decision according to your business

[Freelancier]

I'd start with LLC, just because it offers you some level of liability protection if you take the time/steps to act like the LLC is separate from your own finances. And converting to a corporation in the future (which gets you some additional tax benefits) is not closed off to you.

[HooktoWin]

Hi amez1974, congrats on your new business! :-)

Personally speaking, I'd do everything I can to avoid starting a business as a sole proprietorship.
I agree with Gustav and Freelancier on using the LLC for the reasons they've stated.

But there's another reason I'd choose the LLC.

It can be treated as/taxed as any of the other corporate entities. An LLC can also operate as a C or S corp.
This can be changed at the beginning of each year. When your business grows it's really helpful to be able to change how your company is treated/taxed.

Here's an example. We started a business using an LLC, and we had flow through profits and loss (http://www.nolo.com/legal-encyclopedia/llc-basics-30163.html). That's great when you're starting out but it quickly becomes a problem when you start to make more. So we changed things around so our LLC could be treated as a C-corp. The business has it's own tax return, separate from ours. It enabled us to make more from the same exact business while paying LESS in taxes.

Hope this helps,

Andrew

[amez1974]

Thanks for the feedback! We filed an LCC and opted to do a sole member(me) since we're married and everything goes through the same tax form anyway. It's been a busy week completing paperwork, but a relief that it all wasn't as difficult or as confusing as I thought it might be.

[HooktoWin]

Thanks for the feedback! We filed an LCC and opted to do a sole member(me) since we're married and everything goes through the same tax form anyway. It's been a busy week completing paperwork, but a relief that it all wasn't as difficult or as confusing as I thought it might be.

Nicely done! :) Wish you all the best.

[Jed Smeenk]

If you are wondering what business entity to file a good place to look is SBA.gov and click on "Starting and Managing" from there it will give you a link to all the different business entity's and an explanation of what they entail. It is important to thoroughly look through and decide what you want to do before you start your first business. Once you decide, this site will also show you how to file with your state!

Hope that helps!