What are the different types of business entity options available?
There are two potentially useful options available to your quilt shop if you change your sole proprietorship to another form of business – an “S” corporation or a limited liability company (LLC). Two other common forms of business organization are “C” corporations and partnerships; however these are generally a poor idea for most small businesses because of either tax or liability issues. An S corporation is a business form which has a separate and distinct legal existence apart from its owners (the “S” is from the chapter in the Internal Revenue Code that sets out the tax rules for running an S corporation). In theory, every corporation consists of three groups: those who direct the overall business, called directors; those who run the business from day-to-day, called officers; and those who invest in the business, called shareholders. In the case of a small business, however, a single person can be, and often is, the sole shareholder, director and officer. S corporations, like LLCs,
