Should I incorporate my business as a sole proprietor, partnership, LLC, S Corp, C Corp, or non-profit?
When you are starting your business, you have to establish what type of business structure you want to have. The differences in the types will mainly affect how they are taxed, and how many owners the business can have.
Business Structure Solution
The most popular structure used is an LLC followed by an S Corp. However, before you jump in and choose one of these, I would recommend that you go to Corpnet.com. They have a free tool that you can use to help you determine what type of business structure to establish. It’s very helpful because it takes you through a series of questions that can help determine what the best structure is to incorporate as based on what you are trying to accomplish with your business.
Since I am always talking about funding, I feel it necessary to also tell you at this point, that it’s best not to use a Sole Corporation or a Non-profit structure, if you plan to try to get funding later on. Non-profits usually have to rely on funding from donations and have a difficult time raising traditional sources of capital. Sole proprietorships are not considered as separate entities from the owner and therefore don’t have the limited liability feature that would reduce losses from potential lawsuits etc. Therefore, creditors view them as riskier than LLCs and corporations and are less likely to fund them.
Once you have figured out the name and structure of your business, you can then apply for an EIN number for the business and start doing business!
Do I need a new EIN if I change the structure or name of my business?
If you already established your business and are thinking of changing the structure or name, then you might be wondering if you need to apply for a new EIN number. The IRS has a comprehensive guide to help you determine if a new EIN is needed. Usually, it’s a structural change that will trigger the need for a new EIN, but check out the guide below to get confirmation for your particular situation.