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Business structures and taxes

On Behalf of | Apr 28, 2019 | Business Law

People in Indiana who start a new business need to identify the best operating model for their ventures. There are a variety of factors that should be considered before making a final decision. These factors include the need to protect or separate personal assets from business assets and what level of decision-making flexibility is desired. Another important consideration is taxation. 

As explained by the U.S. Small Business Administration, a sole proprietorship may be one of the simplest and most flexible structures to create but offers no protection for personal assets. Any income of the business is considered the income of the individual as well from a tax perspective. On the other end of the spectrum, a C corporation offers the greatest distinction between personal and corporate assets and income.

According to Forbes, many people chose to establish businesses as S corporations instead of C corporations as the S corps offered some unique tax advantages by not having both personal and corporate income taxed. The new tax code that is now in full effect, however, may change that. C corporations stand to benefit the most from the new tax laws due to the lower tax bracket. However, that does not mean that an S corp is a poor choice. Depending on the amount of money earned by the individuals, a pass-through tax deduction may still be possible.

The decision about how to structure a new business is a complex one and should not be made lightly. Discussions with an attorney may be advisable before making a final selection.




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