Choosing the Right Business Structure: The Foundation for Healthy Business
- The Winston CPA Group
- 2 days ago
- 5 min read
Read this before you do anything else for your business. This is guidance entrepreneurs pay hundreds of dollars per hour to get from Certified Public Accountants.
Take a few minutes to read what follows, which could save you years of fixing what could have been done right from day one.
Whether you handle it today or six months from now, formation and compliance are the part of business that that every business owner must handle.
What this guide covers
Many small business owners start their companies without setting up the right business structure. They run everything under their Social Security number, mix personal and business funds, and plan to figure it out later. Entity formation is the first and most important financial decision you will make for your business.
Your business structure determines how your income is taxed, how you pay yourself, and how you plan for growth. It is the foundation that keeps everything organized.
At The Winston CPA Group, we help business owners choose the right entity type and handle every detail so you can focus on running your business.
Why Your Business Structure Matters
Your business structure impacts:
How your income is taxed
What paperwork you must file each year
Whether you need payroll or quarterly tax payments
How easily you can add partners, investors, or employees
Choosing the right structure can save you money at tax time. The wrong one can leave you paying more than you should.
The Main Business Structures Explained
Limited Liability Companies (LLCs)
A Limited Liability Company, or LLC, separates your business from your personal finances. Owners are called members, and there can be one or several members.
Forming an LLC does not automatically save on taxes. The IRS does not recognize “LLC” as a tax category, so you must choose how it will be taxed.
Default Tax Classifications
Single-member LLC: Taxed as a sole proprietorship. Income and expenses go on your personal return using Schedule C.
Multi-member LLC: Taxed as a partnership. The LLC files Form 1065 and provides each member a Schedule K-1 showing their share of the income.
Members pay self-employment taxes on their share of business income.
S-Corporation Election
Many business owners hear about S-Corporations as a way to save on taxes. Here is what that means.
When your LLC elects S-Corporation status, you start paying yourself a wage through payroll. You no longer pay self-employment taxes on all your business income, only on your wages. This can reduce your overall tax bill.
It also adds more paperwork, including payroll filings and separate business tax returns.
If you already have an LLC and want to elect S-Corporation status, Let The Winston CPA Group handle it.
Beyond the LLC: Partnerships and Corporations
If your business has multiple owners, you may consider a partnership or a corporation.
Partnerships are formed when two or more people share profits and responsibilities. Each partner reports income on their personal tax return. A limited partnership adds protection for certain partners while keeping flexibility.
Corporations are separate legal entities that file their own tax returns. Profits are taxed at the corporate level and again when paid to shareholders, known as double taxation. For businesses that plan to raise capital or expand, this structure can make sense.
Staying Organized: Compliance, EINs, and Registered Agents
Forming your entity is the beginning. Keeping it active and in good standing is what keeps your business legitimate.
Registered Agent
A registered agent is a person or company that receives official mail from the state, such as annual renewal notices or legal documents. Using your home address means your personal information becomes public.
When you form your entity through The Winston CPA Group, you'll receive free registered agent services for one year. We manage your state notices, forward your mail, and keep your business information private.
Employer Identification Number (EIN)
Think of your EIN as your business’s Social Security number. You need it to open a bank account, apply for business credit, or hire employees. If you are still using your personal Social Security number, it is time to stop.
Let The Winston CPA Group handle your EIN application, state filings, and renewal deadlines.
Common Mistakes Business Owners Make
Running business income through personal accounts
Waiting until tax season to register their entity
Thinking LLCs automatically lower taxes
Forgetting annual renewals
Using a home address as the business address
Operating without an EIN
Avoid these mistakes and let The Winston CPA Group handle the details so you can focus on what matters most, running your business.
Frequently Asked Questions
Do I need an LLC if I am the only owner?
Yes. Even as a single owner, an LLC helps you separate business and personal finances and gives you flexibility in how you are taxed.
What is the difference between an LLC and a corporation?
LLCs are flexible and simpler to manage. Corporations have more rules but can benefit businesses planning to grow or attract investors.
Should I be taxed as an S-Corporation or stay as an LLC?
It depends on your income and goals. S-Corporations can help reduce self-employment taxes, but they require payroll and additional administrative work. The Winston CPA Group will help you compare the numbers.
What is a registered agent, and do I need one?
Yes. Every LLC must have a registered agent to receive legal and tax documents. When you form your entity with us, you receive a registered agent for one year at no cost.
Can I change my tax classification later?
Yes. LLCs can elect to be taxed as S-Corporations or C-Corporations later if it benefits the business.
How do I stay compliant with my state?
Each state requires annual renewals or filings to keep your entity active. The Winston CPA Group tracks your renewal dates and sends reminders so you never miss a deadline.
Get free reminders and we will keep your business filings current.
Build the Foundation Your Business Needs
The success of your business starts with structure. Whether you are just starting out or need to fix what is already in place, The Winston CPA Group can handle the setup, the paperwork, and the renewals.
You already have enough to manage in your business. Let The Winston CPA Group handle this part for you.
The content of this blog is for informational purposes only and should not be taken as legal or accounting advice. The Winston CPA Group is not responsible for any losses or damages incurred by relying on the information provided here. For personalized tax guidance, book a consultation with our team.
Comments