Financial Figures

Understanding what the different entity options provide is a good place to start. With that information, you can move forward knowing what you’re in for.

This can be a good option to choose when you provide a service in your name, have a hobby business on the side or don’t expect to have liability concerns. It only requires a local business license, with costs starting at $50-$100, based on annual sales.

You can get a DBA (Doing Business As) even if the business is your name. Most banks will ask for one to open a business bank account. The filing fee for this in Roanoke is $10. Selling a product for profit can add additional tax issues, so consider securing an EIN. Cost $0. A Sales Tax Certificate of Registration is required to collect sales tax. Pay attention to filing deadlines.

Some believe this provides an extra layer of legal protection, but the veil shielding your personal assets can be pierced pretty easily. It’s handled the same as a sole proprietorship from a tax standpoint.

This includes multi-member LLCs, which is very different from a single member LLC. Filing tax returns gets more complicated with this entity. While Sole Proprietorships and Single Member LLCs file on the personal return, multi-member LLCs must file a separate return for the company.

The S-Corp has additional tax advantages but also requires additional compliance, which brings additional costs. This is a flow-through entity so any profit or loss gets added or deducted off of your personal tax return. You are, however, required to file a separate return for the S-Corp entity.

By Michael Shelton

Deciding on how to best set your business up for the long-term can get confusing. Often everyone’s an expert on what you should do without bothering to ask questions about your particular circumstances.

This has its own compliance items and its own tax return, but is not a flow through like the others. The corporation itself pays for the taxes. If there’s a taxable obligation it’s charged at whatever the corporate tax rate is at that time.

A C-Corp provides flexibility in how you manage profit. You can do it through shareholders or dividends or owner’s distributions and more. The tax return is more complicated, so costlier.

There’s a lot to consider in choosing the right business entity for you. Don’t just do what someone at a networking event suggests. Learn the pros and cons. Hopefully this will help get you started.

Michael Shelton is a financial retirement counselor. Reach him at Michael@360Wealth Consulting.com