CHOOSING THE RIGHT ENTITY FOR YOUR BUSINESS
If you are a self-employed or an independent contractor (receiving a 1099-MISC), you should consider forming a legal entity (either a corporation or limited liability company (LLC)) because it may provide significant tax savings and limit personal liability. At Spaulding Legal, APC we take the time to analyze your specific circumstances to properly advise you on whether or not to form a legal entity. Our goal is to counsel you on tax and nontax consequences so you make an informed decision. Creating a legal entity is not right for every business or independent contractor. However, it is often a timing issue. Therefore, you should know what to look for in the future so you can make the adjustment at the right time. If it is the right decision, we are specifically set up to handle every aspect of creating and implementing the new entity (state filings, tax filings, governance, etc.).
Many people understand there are potential tax savings in operating as an S-Corp (a qualifying legal entity that elects to be taxed under subchapter S of the Internal Revenue Code). In the right circumstances, this is very true. However, it is important to accurately analyze when you will see net tax savings. In other words, although you may save on taxes in one area, the additional costs and taxes associated with maintaining an S-Corp may end up unnecessarily costing you money. At Spaulding Legal, APC we are specifically set up to analyze whether the overall decision will end up saving you money every year.
Perhaps the most notable non-tax consideration/benefit of forming certain legal entities is the limited liability protection it provides. If you are set up correctly and understand what formalities/filings must be maintained you will be able to limit your personal liability. This means if you have a house or other personal asset(s), you can prevent potential creditors from reaching through the legal entity and taking those assets. The limited liability aspect of operating certain legal entities does require a fact-specific analysis to provide the highest level of protection. Many small businesses do not correctly follow the law in this area, which often time eliminates any limited liability protection.
At Spaulding Legal, APC we take the time to understand your specific needs. This allows us to properly counsel you on what needs to be maintained thereby maximizing your protection. In the end, our goal is to assist you in protecting your personal assets, minimizing taxes, and allowing you to focus on your work.