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If you are an entrepreneur, you are probably contemplating which type of organizational business structure is right for your business idea. There are several options to choose from, LLCs, C Corps, S Corps and Sole Proprietorships. However, forming an S corporation, also called a Subchapter S Corporation, may be the best decision for your business in the long run. If you want to learn the advantages of S Corps for long-term business performance, keep reading below.
Provides Credibility
One of the foremost advantages of S Corps is the credibility they provide your burgeoning business. When potential clients or customers see that your business is an actual corporation, it puts their minds at ease. It makes you, the business owner, and the business itself appear much more professional and reliable, especially if you have a Google Local listing. This is one benefit that cannot be gained by avoiding incorporation.
No Need For Multiple Partners
S corporations do not require multiple partners for formation. This is not true of LLC, or limited liability corporations. LLCs require at least two owners in some states. However, S corps require just one owning in order to incorporate. This is a huge advantage if you would rather avoid having to take on partners for your business venture.
Unlimited Lifespan
Subchapter S corporations are also beneficial because they have an unlimited time span. This is also an advantage over forming an LLC, which has a limited shelf life before you need to incorporate as another business structure. Years down the line, you can focus on invoice factoring instead of having to re-incorporate. If you want to avoid the extra paperwork down the line, this is another huge advantage S corps have over LLCs.
Tax Free Transfers
S corporations also allow for tax free ownership transfers in the event that you should need them. This is yet another advantage over an LLC. Ownership of S corps is freely transferable. This makes it easier to sell your interest without the approval of other shareholders. If you have multiple stakeholders, this benefit cannot be understated.
Simpler Accounting
Subchapter s organizations also have the benefit of easier accounting. Unlike other business structures, which utilize the accrual accounting method, s corporations without inventory can use cash method accounting. Unfortunately however, if you are going to start a clothing company, this is not a benefit you can take advantage of. Cash accounting is much simpler, especially if you plan to do you own accounting and bookkeeping. This is a huge benefit, especially for those business owners that do not consider themselves that adept at mathematics.
If you are an entrepreneur looking to open your own business, deciding on a business structure is the first stp to setting your business up for success. However, with multiple types of business structures to choose from, it makes the decision a tough one. S corps have a ton of advantages to offer entrepreneurs over LLCs. Consider these benefits listed above when deciding how to incorporate a business that fits your needs.
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