LLC or S-Corp: What’s right for your agency?

When starting off, the idea off formulating a business structure is on the bottom of sexiest parts of starting a business. That said, it’s important to address it early on, so after you can focus on the good stuff. While there are a few different types of business structures available, I’d recommend either starting off with an LLC, or an S-Corp. These are the two most popular options, and what’s right for you will depend on how your business works.

Limited Liability Corporation (LLC)

  • Protect your personal assets in case of any legal action against your business.
  • Easy to setup. You can use a discount provider like Legal Zoom to handle the formation.
  • It’s a Pass Through Entity. This means you’ll include all profits & losses on your personal tax return.
  • It’s inexpensive. The annual fee in California is $800 for businesses making less than $250,000 a year.
  • No Shares to assign. If you have a couple founders and aren’t looking to take on any other stakeholders, and LLC can be a great option. Otherwise, look at the S-Corp.

 S Corporation (S-Corp)

  • Protect your personal assets in case of any legal action against your business.
  • It’s a Pass Through Entity. This means you’ll include all profits & losses on your personal tax return.
  • Require more formalities and paperwork, but may be seen as a more long term structure for investors.
  • Stock. S-Corps can assign shares to up to 100 shareholders, which is an ideal starting place if you’re looking to bring on partners, advisors, or investors early on.

*I’m not a lawyer, and this is not intended to be legal advice.