While the LLC can be very advantageous to many small businesses, there are also cases where the S Corporation would be the preferred business structure.
Westlake Village, CA (PRWEB) July 17, 2013
CorpNet.com, a leading online business document filing company that helps entrepreneurs start a business and keep a business in compliance, announced that nearly three-fourths (72%) of its customers opted to form a Limited Liability Company (LLC) as the legal structure for their business during the first half of 2013.
“We were not surprised to see such a high preference for the LLC among our customers. Time and time again we hear small businesses say that they’re looking for a more formal business structure than the sole proprietorship, but they don’t want to be overwhelmed by paperwork and administrative burdens,” said Nellie Akalp, CorpNet.com’s Founder and CEO.
While the LLC is a relatively new business structure (it has become mainstream only in the past two decades), many small businesses are opting to form an LLC. Owners of an LLC enjoy limited liability protection, ease of transfer of ownership shares, pass-through treatment of income to the owners for tax reporting purposes, and a lower administrative burden than faced by owners of a corporation. For example, an LLC is not required to have a board of directors or officers.
“While the LLC can be very advantageous to many small businesses, there are also cases where the S Corporation would be the preferred business structure,” said Akalp. “For example, 100% of LLC profit is subject to self-employment tax, but only a percentage of S Corporation profit is subject to social security. In addition, some state LLC fees can be very high. So if you have high revenue, low profit entity, it might be better to be an S Corporation.”
Since there are hefty tax implications associated with selecting a business structure, many small businesses opt to discuss their financial situation with a tax advisor and then incorporate online or form an LLC online through CorpNet.com. CorpNet also offers a free Business Structure Wizard to help customers choose the best business structure.
According to CorpNet’s CEO, Nellie Akalp, the breakdown of businesses formed through CorpNet.com for the first half of 2013 was as follows: LLC (72%), S Corporation (13%), and C Corporation (12%). In addition, these figures are roughly consistent with overall totals since CorpNet’s launch in 2009.
The high preference for the LLC among CorpNet.com customers parallels findings from a 2011 report from the U.S. Small Business Administration (SBA). According to the report, 35.76 percent of newly established firms chose the simplest legal structure, the sole proprietorship, followed by 30.5 percent who chose to organize as an LLC.
S Corporations accounted for 20.14 percent of the start-ups surveyed, while C Corporations accounted for only 7.94 percent.
CorpNet.com is an online business document filing service that provides new and existing business owners with the most comprehensive, cost-effective services when it comes to starting, protecting, and managing a business. Through its website, CorpNet.com provides business filing services required for a variety of business needs such as: incorporate a business or form a Limited Liability Company (LLC), file a DBA, Doing Business in Multiple States (Foreign Qualifications), close a business (Dissolutions), Registered Agent Representations, Trademark Search and Registrations, and Corporate Compliance services and supplies for all 50 states.
Founded by experienced entrepreneur/attorney husband and wife team, Philip and Nellie Akalp, CorpNet.com is a private company based in Westlake Village, CA. For more information, please visit http://www.corpnet.com or follow @CorpNet on Twitter.