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Tax Law (Questions About Taxes)/Business Structure Formation


Mr. Fritzler:

Hello, my name is Nathan and I'm a fellow expert on Allexperts (albeit in the Microsoft Excel category).  I have some familiarity with corporate structures, but I'm looking for a bit of advice on the benefits of one versus another.  

My wife and I are planning on purchasing a veterinary, service industry, practice in Jan 2014.  

Normally I would have immediately opted for an LLC subchapter S; however, I have been told recently that may not be the best avenue with current changes in legislation (not sure exactly what changes).

Do you have any recommendations?  Please feel free to ask any follow-up questions which might help you answer mine.

I think everyone from accountants, lawyers, Brothers-in-law, neighbors, have recommendations. Unqualified, absolute, one-size-fits-all recommendations. So if you have asked this question of someone and they gave you an answer, let's consider that unqualified.

A qualified recommendation is going to based on some criteria. Not a one-size-fits-all answer. There needs be at least one "IF" in the statement, and when it comes to business, business being complicated, there are probably a lot of "If"s.

What are your goals?

"If" you are looking for cheap, then go sole proprietor.
"If" you are looking for easy, go sole prop.
"If" you are looking for cheap and easy but want others involved, then go general partnership.

You get the idea on "IF". the next part of the equation with be the "THEN".

IF you choose sole prop or general partnership, THEN you will not have any separation when it comes to liabilities. You will have no opportunity to reduce taxes, and the list goes on and on, in fact you are probably familiar with at least some of the "Then"s in those "If"s.

Let me jump ahead and you can pull me back if I leap in the wrong direction.

IF, you are going into business TO BE PROFITABLE; and
IF, you are concerned that litigation may reach out to you; and
IF, you want to do business like all the most successful businesses in this country do,

THEN, do business as a real corporation.

Corporations pay lower taxes on PROFIT. There are no taxes on Losses no matter what type of entity.
Corporations have a long history of creating separation which is a necessary component in managing liability.
Name 3 of the most successful businesses you can think of and I expect that they will all be structured as real corporations.

I hope you take the above explanation as if the proper emoticon was attached.

But it is true that business is infinitely complex, and that you the business owner have many paths that you can take, none are a guaranteed success. And you will need to make more decisions than just a choice of structure, you will have to be deeply engaged in the business and prepare for a myriad of things that can blindside you.

That is really what we focus on, preparing to manage success. As long as you are losing money  and falling apart in a business you are immune from a host of problems, like taxes, and liability, and lawsuits. But just as soon as you show promise as a success, start to cash flow positively, appear as a threat to competition, administrative agencies, or anyone that wants to feel threatened, then the problems start.

I want businesses to succeed. And that takes work.

My phone number is 877-627-7761

Give me a call and I'll address some of the still nagging issues that seem to run counter to my recommendation.


Tax Law (Questions About Taxes)

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Richard Fritzler


Specializing in Business and Corporate taxation. Comparing the advantages and requirements of different business entities, such as Sub-S Corporations, LLC`s, Partnerships (Both Limited and General), Doing Business as a Sole Proprietor, or Using a C-Corporation. Issues regarding K-1 distributions, 1040, schedule C, 1120, 1120s. Are you considering domiciling a Corporation in a low tax state? I can review the benefits and misinformation that exists.


I have been in the business of assisting business owners in reducing their taxes and liability since 1986.

National Small Business Owners Association.
Contributing author to "The Corporate Standard Newsletter".

Contributing author to "The Corporate Standard Newsletter".

I have been in the business of assisting business owners in reducing their taxes and liability since 1986.

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