{"type":"rich","version":"1.0","provider_name":"Transistor","provider_url":"https://transistor.fm","author_name":"Inside BS Show","title":"Which Business Entity Should You Choose? S-Corp, C-Corp, LLC? | 791","html":"","width":"100%","height":180,"duration":1430,"description":" “Choosing the right structure is about where you want to go, not just where you are today.” - Harry Cendrowski1. S-Corp: Overhyped and Often MisunderstoodMany business owners default to an S-Corp to save on FICA (payroll) taxes.This choice can be short-sighted, especially if the owner has not considered long-term growth, financing, or investment plans.Major downside: No tax basis for debt at the shareholder level, limiting deductions if the business borrows money.2. LLC Taxed as a Partnership: More FlexibilityPreferred by private equity investors and professional investors because:They can’t invest in S-Corps (due to shareholder restrictions).LLCs allow multiple financing rounds (Series A, B, C, D) and different classes of ownership, unlike S-Corps which can only have one class of stock.Offers options like carried interest and profit interests, which are not available in S-Corps.Easier to plan for growth, investor entry, and partial ownership sales.3. C-Corp: Strategic for Certain Growth PlansOften used when:A company may qualify for Qualified Small Business Stock (QSBS) exemptions.The business has high working capital needs and benefits from the 21% corporate tax rate (better for reinvesting profits).Sometimes elected by LLCs for C-Corp tax treatment when appropriate.When Should You Change Entity Types?Plan based on your 2 to 5-year horizon:Are you raising capital?Do you plan to sell?Are you acquiring other businesses?If you're already an S-Corp but want flexibility, set up a new LLC and transfer the assets via an F-reorganization.Act before the event happens, not when you're in the middle of a transaction.Additional Critical PointsReasonable Salary Requirement for S-Corps:S-Corp owners must pay themselves a reasonable salary before taking distributions to avoid IRS penalties.Undervaluing your salary can lead to tax issues and lower your business valuation at exit (buyers will normalize your compensation in their calculations).State Tax Risks (SALT - State and...","thumbnail_url":"https://img.transistorcdn.com/PiZj2Jvm0A50__OqC5DH07qJG7fmMYBgHzZdsz2P7co/rs:fill:0:0:1/w:400/h:400/q:60/mb:500000/aHR0cHM6Ly9pbWct/dXBsb2FkLXByb2R1/Y3Rpb24udHJhbnNp/c3Rvci5mbS83ZDIx/MjEwZDNiZDMwN2Uw/YzJiNjE0ZTNkMmFm/ODZlOC5wbmc.webp","thumbnail_width":300,"thumbnail_height":300}