Lesson 11 of 25
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Setting Up Your Business Entity

⏳ Video Length — 00:05:28

Lesson Summary


Congratulations, you’re at the very first step of building business credit – establishing an entity! This step is required to keep your personal and business affairs separate, minimize your risk, and establishing credibility with banks and vendors. But how do you actually create that business as a legal entity? 

First, you must CHOOSE it. When you choose a legal entity you should consider the ease of starting and maintaining the business, how taxation rules will affect your finances, and your personal liability and plans for partnering and growth. The most common legal entities include:

Sole Proprietorship

According to the IRS, a sole proprietor is someone who owns an unincorporated business by himself or herself.

If you have sold a good or service and have not registered your business otherwise, you are a sole proprietorship.

Partnerships

A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes to the business and expects to share in the profits and losses of the business.

It is taxed similarly to a sole proprietorship.  

Limited Liability Company (LLC)

LLCs are registered through the state and each state has a unique process.

They provide a separation of the personal from the business.

Unlike an S corporation or C corporation, LLCs are structurally flexible with greater taxation options.

S corporation

Like LLCs, S corporations provide a separation between the personal and business.

S corporations are corporations that elect to pass corporate income, losses, deductions and credits through to their shareholders for federal tax purposes.

C corporation

While C corporations, also known as corporations, are the most common entity in the U.S., very few small businesses are registered as a C corp.

Like LLCs and S corporations, C corporations provide a separation between the personal and business.

They are taxed separately from their owners.

Next Steps:

Visit one of our partners to setup your business entity today.