How to Choose the Correct Arizona Business Entity

There are many decisions that must be made when deciding to open a business in Arizona and one of those items that needs to be addressed is the type of business entity to form. The entity that you choose will determine many of the other business decision you make, from everything from tax implications to the liability the owner is opening himself up to, to the business control. Getting the right information from a trusted Arizona LLC and corporation expert should be your first step.

There are several entities available including: sole proprietorship, partnership, S-Corp, C-Corp and a limited liability company. Here is a primer on the various types of entities and that they mean:
C-corporation: It can take much longer and is more labor intensive to establish a C-Corp, but it offers the greatest amount of protection against liability and business risk protection. There are strict government regulations that must be adhered to as it relates to reporting, financial disclosure information and the company’s corporate structure is maintained. With a corporation the rights of ownership pass to the named heirs upon the death of the owner. A C-corp brings with it income tax flexibility and offers myriad tax deduction benefits. A caution to keep in mind, is that a C-corp can lead to double taxation if taxes and financials aren’t properly accounted for.

S-Corp: Under the auspices of an S-corp, you are able to combine the most advantageous features of several entity types. An S-corp gives owners the benefits of a limited liability entity while allowing the profits and losses of the company to flow through to individual business owners for income tax purposes. This filing benefit avoids the potential for double taxation. Governmental regulations, costs and legal requirements with starting an S-corp are fewer than with a C-corp.
Limited Liability: Much like an S-Corporation, a Limited Liability Company (LLC) is an amalgamation of the other entities. It contrasts with the proprietorship and partnership, an LLC offers owners limited liability (as the name denotes) for both business risk and debt from ownership in the company.

Sole Proprietorship: This business is owned by one individual and is the easiest to form of all the business entity forms. This form is by far the easiest to establish and operate as it relates to regulatory filing and requirements. The business owner, under a Sole Proprietorship will file a Schedule C for income tax purposes. Also under this entity, the owner assumes the business risk and all liabilities associated with the operation.

Partnership: As the name suggests, a partnership entity is for more than one business owner. It is easy to set up and establishes the successorship in the event of death or dissolution of the business.

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