Corporations
The first asset protection structure involves incorporating the business; you want to decide for an S or C type Corporation depending on your tax strategy for active business organization. You have Liability involving employees. You are liable for their decisions; your personal assets can become vulnerable from employee’s decisions. So we have taken the sole proprietorship and protected it using a Corporation.
With S type Corporations, they handle unlimited amounts of income distribution versus a C type Corporation which is standard with different tax rates. So now we are discussing corporate profits with your small business and tax them at the corporate rates and retain them or take them out as a W-2 wage or you can distribute upon a dividend which has double taxation.
The C type Corporation can be turned into an S type Corporation can be back to flow through taxation. Now you are dealing with several entities, corporations, LLC’s and limited partnerships. Back to small business planning, we have to decide on what type of structure we want to run the business with. There is a Sole Proprietor which is full liability; Corporation and Limited Liability.
