Choosing the structure
There is no universally correct entity. The right answer depends on profit level, how many owners there are, whether you intend to raise capital, whether you will hold appreciating assets, and which states you operate in.
- Single-member LLC: simplest to run, profit taxed on the owner's return, full self-employment tax exposure
- LLC with an S-Corp election: splits profit between salary and distribution, reduces self-employment tax on the distribution portion, adds payroll and filing obligations
- S-Corporation: similar treatment with stricter ownership rules and a single class of stock
- C-Corporation: entity-level tax, relevant for companies raising institutional capital, retaining earnings, or qualifying for qualified small business stock treatment
- Partnership or multi-member LLC: flexible allocations, the right home for property and joint ventures
- Holding company structures: separating operating risk from appreciating assets
What formation actually involves
- State filing of articles or a certificate of formation
- EIN application with the IRS
- Election filings, including Form 2553 where an S-Corp election is being made, filed inside the deadline
- Operating agreement or bylaws that reflect the real ownership deal
- Registered agent appointment
- Foreign qualification in every additional state where you do business
- Beneficial ownership reporting where it applies
- Opening the accounting file and chart of accounts on day one, not a year later
Restructuring an existing business
Most of our formation work is not greenfield. It is a profitable business sitting in the wrong structure, usually a sole proprietorship or a plain LLC that has grown past the point where the self-employment tax is tolerable, or an S-Corp that should have separated its real estate years ago.
Restructuring has tax consequences of its own and the sequencing matters. We model the before and after, handle the filings, and move the banking, payroll and contracts across without a gap in operations.
Frequently asked questions
Should we incorporate in Delaware or Wyoming?
Usually not, unless you are raising venture capital or have a specific legal reason. Operating in one state while incorporated in another generally means registering and filing in both, which doubles the administration for no tax benefit.
When does an S-Corp election start paying for itself?
It depends on profit after reasonable compensation and on your state, since some states tax S-Corps at the entity level. The break-even is commonly in the range where net profit comfortably exceeds a market salary for the owner's role, and it is worth modelling rather than assuming.
Can you form the entity and handle the ongoing work?
Yes, and that is the usual arrangement. Formation, then bookkeeping, payroll and tax under one engagement.