Lee Knoll discusses the importance of choosing the right business structure
Listen to the interview on the Business Innovators Radio Network: https://businessinnovatorsradio.com/interview-with-lee-knoll-managing-partner-of-knoll-company-next-generation-cpa-firm-discussing-business-structure/
Business structure is a crucial aspect of any business, as discussed with Lee Knoll, encompassing various entities such as corporations, LLCs, partnerships, and sole proprietorships. Each type of business structure offers different benefits and implications for the business owner.
Corporations: Corporations provide limited liability protection to their owners, meaning that the personal assets of the owners are typically shielded from business debts and liabilities. However, corporations are subject to double taxation, where the corporation itself is taxed on its profits, and then shareholders are taxed on dividends received.
LLCs (Limited Liability Companies): LLCs also offer limited liability protection to their owners, similar to corporations. One advantage of an LLC is the flexibility it provides in terms of taxation. For example, a single-member LLC can choose to be taxed as a sole proprietorship or a corporation, while multi-member LLCs can opt to be taxed as a partnership or a corporation.
Partnerships: Partnerships involve two or more individuals sharing ownership of a business. There are different types of partnerships, such as general partnerships and limited partnerships, each with its own set of rules regarding liability and decision-making.
Sole Proprietorships: Sole proprietorships are the simplest form of business structure, where the business is owned and operated by a single individual. While easy to set up, sole proprietorships do not provide liability protection, meaning the owner is personally responsible for the business’s debts and obligations.
Lee Explained: “You can be an LLC when you start when you’re small, you can be a one-person LLC if it’s just yourself. Then down the road when you start making money, generally, I recommend that once you make a net profit of around $50,000 plus, you can then elect to be taxed as an S-corporation for tax purposes, not changing the entity.”
Choosing the right business structure is crucial for various reasons, including liability protection, tax implications, and operational flexibility. Business owners need to seek professional advice, such as from a CPA, to determine the most suitable structure for their specific needs and goals. Regularly reviewing and potentially adjusting the business structure as the business grows and evolves is also recommended to ensure alignment with the company’s objectives and legal requirements.
Lee also shared: “Forget the Shoebox, Let us do the books; We have the tools to simplify tax and accounting.”
About Lee Knoll
An experienced CPA, Lee has worked in the accounting profession for over 30 years advising clients in small businesses, estates, and trusts as well as being an Advanced QuickBooks Certified ProAdvisor, QuickBooks Online Certified, and Bill.com guru. He has advanced expertise in working with businesses in the real estate, transportation, legal industry and professional services industry.
Learn More: https://www.knollcpa.com/
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