{"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 Cendrowski\n\n1. S-Corp: Overhyped and Often Misunderstood\nMany business owners default to an S-Corp to save on FICA (payroll) taxes.\nThis choice can be short-sighted, especially if the owner has not considered long-term growth, financing, or investment plans.\nMajor downside: No tax basis for debt at the shareholder level, limiting deductions if the business borrows money.\n2. LLC Taxed as a Partnership: More Flexibility\nPreferred by private equity investors and professional investors because:They can’t invest in S-Corps (due to shareholder restrictions).\nLLCs 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.\nOffers options like carried interest and profit interests, which are not available in S-Corps.\nEasier to plan for growth, investor entry, and partial ownership sales.\n3. C-Corp: Strategic for Certain Growth Plans\nOften used when:A company may qualify for Qualified Small Business Stock (QSBS) exemptions.\nThe business has high working capital needs and benefits from the 21% corporate tax rate (better for reinvesting profits).\nSometimes elected by LLCs for C-Corp tax treatment when appropriate.\nWhen Should You Change Entity Types?\nPlan based on your 2 to 5-year horizon:Are you raising capital?\nDo you plan to sell?\nAre you acquiring other businesses?\nIf you're already an S-Corp but want flexibility, set up a new LLC and transfer the assets via an F-reorganization.\nAct before the event happens, not when you're in the middle of a transaction.\nAdditional Critical Points\nReasonable Salary Requirement for S-Corps:S-Corp owners must pay themselves a reasonable salary before taking distributions to avoid IRS penalties.\nUndervaluing your salary can lead to tax issues and lower your business valuation at exit (buyers will normalize your compensation in their calculations).\nState Tax...","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}