The decision to incorporate – and how to do it – is one of the first important decisions most business owners make. Most people seek advice from attorneys, accountants, or friends or relatives who own their own companies in order to decide which corporate structure best suits them, and the majority end up choosing a Sole Proprietorship, LLC, or S Corporation. Every once in awhile, owners choose to incorporate as a C Corporation.
Through the course of our business at Bridge Ventures, we have the opportunity to observe how each of these structures impact an owner’s tax liability when selling their company. Disclaimer: we are not attorneys or accountants, and you should seek the advice of one or both if you need incorporation or tax guidance. That being said, if you own a small business then we have some words of advice: unless you are building the next high-growth tech start-up and you are going to attract millions of investment dollars from Venture Capital investors and your business will therefore require multiple shareholders and multiple classes of shares and a complex capital structure, do not choose the C Corporation. The benefits are minimal, at best, to most small business owners while operating the company, and they come at a huge expense when you try to sell. Continue reading →