With many opportunities available for small businesses, we are regularly engaged to assist with business planning and startups. “What is the best type of business entity?” is a question we regularly hear. And in similar fashion to many financial questions, we use the details to drive the decision.
Build the Foundation First
When starting any type of project, especially a new business, if you start with a good blueprint and build a solid foundation, you have a much better chance of success. The IRS tends to think logically: If a new venture looks like a business and acts like a business, it’s more likely the IRS will consider it a business. In the real world, this means from day one, the business should have its own bank account and credit card and shouldn’t be operating inside your personal checking account. It also means you should have a well-designed business plan with intent to make a profit. The type of company or business entity isn’t at the core of the IRS ‘business vs hobby” decision.
With More Risk and Complexity, Add More Protection
The simplest form of business structure is a Sole proprietor. Other structures such as Limited Liability Company, Partnership, S or C corporations each have their advantages and disadvantages based upon the personal situations for the business owner(s). These include the location where the business formed, the number and objectives of business owners, risks of operating the business, tax implications and more. In order to get it right, it is important that the unique needs of the founders be taken into consideration.
At Buttonwood, we develop client-specific strategy by thinking about assets, entity types, tax implications and liability concerns as interrelated to one another – not as standalone strategies.
For the same reason a business would hire a CFO, we serve as Family CFO for our clients. We coordinate comprehensive tax, insurance, estate, investment, cash flow, retirement, education and business strategies. We not only make specific recommendations, we also implement, monitor and adjust strategy as you and your family move through life. We do the work, allowing you more time to appreciate your wealth.
If comprehensive strategies are something you are interested in, simply click here to schedule an informal conversation to learn how our Family CFO services can benefit you and your family.