I am starting a new solo practice in Texas in August. What are the pluses and minuses to declaring my practice as a sole proprietorship vs incorporating. What about S-Corps vs C-Corps? It will be a small practice with no more than 2 employees. Thank you for your help.

Zip Code: mille125@mc.duke.edu

Sometimes it is better to follow the old adage, first crawl, then walk and later run. It might be better to start your business as a sole proprietorship to keep costs down and then later set up a C Corp, immediately converting to an S Corp. You should discuss the need for legal liability protection with your attorney before deciding not to set up the corporation at the outset.

C Corps generally are set up and used if you plan to take your company public and want to to viewed in a fish bowl. Otherwise an S Corp is the appropriate entity to use, because the S Corp eliminates the double taxation involving a C Corp. An S Corp also eliminates the need to be concerned about the 10 year built in gains tax if you have a C Corp that you later convert to an S Corp. By making the Corp an S Corp from the outset, any sale of the business involving sale of assets would involve only one level of taxation (at the individual level). If you have questions, I can be reached at 817 481 3265.

Thanks,

Bill

Zip Code: bill@midcitiescpa.com

At a minimum, I would consider an entity called a Limited Liability Company (LLC). LLC's offer a level of protection to your personal assets (non-practice assets) that is provided by incorporating. (Beware that, generally, professionals are always fully exposed for their own malpractice claims -- be sure to consult an attorney on this issue). Because LLC's are not "corporations", you are spared some of the administrative burden required by corporations.

Except in really rare cases, I never recommend "C" corporations -- and never would use a non-incorporated "sole proprietorship".

S-Corporations can be very advantageous and I prefer them for numerous reasons. But, they are real corporations -- only, any profits remaining (after a salary to the owner) are reported and taxed to the "stockholder/owner".

There are too many details to discuss here and you really should seek face-to-face professional consultation.

Lonnie Hardy,CPA

Zip Code: lonnie@jameshardy.com

thank you for your suggestions. I do appreciate them

Zip Code: mille125@mc.duke.edu

I don't know the rules in the state you are in, but I am starting a small cleaning business and found out after paying for fictitious name, city and county licenses that I had to be incorporated in order to apply for workers comp exemption. Workers comp is expensive and not needed for three employees or less in this state though I realize that I am responsible for any accidents on the job.

Zip Code: aokcleaning@aol.com