Choosing the Right Business Structure

June 17, 2025

When it comes time to finally open that business you’ve been dreaming about, what structure should you choose?

Choosing the right business structure is one of the most important decisions you will make as it controls the way you are able to raise capital, how you will pay taxes, and what happens to your business if you decide to sell.


Sole Proprietorship/Single-Member LLC

The simplest and most cost-effective business structure is a sole proprietorship or single-member LLC. Both of these structures retain the same characteristics and will report any pay taxes on the individual return on Schedule C. This opens the door to self-employment taxes and limits capital raising activities.

In a sole proprietorship or single-member LLC, you can’t bring on additional partners as you are solely responsible for reporting all income or loss. This means that there is no succession planning and your children would need to form a new entity to continue doing business. These structures are most common for small businesses and entrepreneurs just getting started.


Partnership

Moving up the complexity scale is a partnership. Partnerships can be set up as multi-member LLCs as well. Unlike a single-member LLC or sole proprietorship, partnerships will file a separate business return on Form 1065. Since there are multiple partners, there is expanded access to capital from member contributions; however, the contributions and distributions from partnership funds must be according to an agreed-upon partnership schedule.

Additionally, partnerships are great if you aren’t planning on staying in the business long-term as you can easily be bought out or sell your shares in the business. Partnerships also give members the opportunity to leverage tax savings by taking a salary from the company and a distribution, reducing or eliminating self-employment taxes.


Corporation

S-corporations and c-corporations are the next two business entities. Corporations are more complex than a partnership but offer greater liability protection in the event of a lawsuit. S-corporations pass income down to the shareholders of the company, who report the income in a similar manner to a partnership, while c-corporations pay all taxes at the entity level.

Selling ownership in a corporation is also easier since c-corporations can have many shareholders and are generally a more liquid investment. Additionally, public corporations have the ability to raise capital for initial public offerings, making it a great option for businesses that need a large upfront investment to begin operations.


Nonprofit

Nonprofits are a less common business structure as it takes a great deal of effort and compliance to secure nonprofit status. One of the top benefits of becoming a nonprofit is the tax-exempt status for business operations; however, the business must meet rigorous qualifications to gain those tax benefits. Certain business types, such as politically motivated businesses, are disallowed from becoming a nonprofit, making other business structures more favorable unless the primary purpose of the business is for charitable reasons.


Summary

Each business structure retains unique characteristics and benefits, which is why choosing the right one is so important. Gordian Financial has been helping new businesses work through choosing the most beneficial structure for years.

For more information or to set up a consultation to go over your specific situation, reach out to a team member today. 

HOA Financial Management That Works for You

By Meghan Riskowski • June 17, 2025
Running a homeowners association (HOA) requires more than maintaining shared spaces and upholding community guidelines, it demands strong financial management to ensure long-term stability. At Gordian Financial, we provide the accounting expertise and financial oversight that HOA board members and property managers need to lead with confidence. We partner with HOAs of all sizes to keep financial operations accurate, transparent, and compliant. From monthly reports to annual budgets and reserve studies, we handle the details so you can stay focused on serving your community.

Choosing Between a Salary and a Distribution

By Meghan Riskowski • June 17, 2025
One of the perks of being a business owner is the ability to choose how you get paid. There are two main ways to take money out of your business: a salary and a distribution. Each of these options retains tax advantages that need to be considered, making it necessary to consider the basics of each option to choose the right one for your situation.

New Tax Deductions and Credits

By Meghan Riskowski • June 17, 2025
The tax law is constantly changing, making it essential that business owners stay on top of the deductions and credits they are able to take. Pandemic relief is still lingering around, giving employers the ability to take exclusive tax credits while the IRS has altered some of the deductions available for business owners. The Employee Retention Tax Credit, temporary 100% meals deduction, student loan interest repayment option, and entity-level tax payments are areas where the tax law has changed, making comprehension a must to reduce your tax bill.

Bookkeeping Procedures to Complete on a Monthly Basis

By Meghan Riskowski • June 17, 2025
Creating the most beneficial procedures in your bookkeeping function takes time and trial and error. The procedures that work for one company might not be what works best for your business. As a result, understanding common bookkeeping procedures that should be completed on a monthly basis provides you with a great starting point to add to or adjust your current policies.

Bookkeeping Best Practices

By Meghan Riskowski • June 17, 2025
What is one of the most important aspects of running a business? You may be thinking of advertising or revenue streams. Although those are important areas, bookkeeping is one of the top functions that makes or breaks a business. Understanding bookkeeping best practices give you the ability to set a strong foundation for your business to grow, making it critical to evaluate and improve your current procedures.

The Benefits of Regular Bookkeeping

By Meghan Riskowski • June 17, 2025
Running a successful business takes time, perseverance, and dedication. Many business owners become so consumed with generating their first sale or hitting a large milestone that they neglect the basics. Regular bookkeeping is vital to long-term success and scalability, leading to improved cash flow, the promotion of financial transparency, more informed business decisions, a reduction of fraud risk, and timely tax remittances.

Guide to Small Business Bookkeeping

By Meghan Riskowski • June 17, 2025
Bookkeeping is an essential component of managing a business. When starting a business, it’s one of the first things you should do. If you’re not doing it, you’re losing out on crucial information about your company that could help in its expansion and growth. Still, if you are unfamiliar with the process, bookkeeping might be scary. The purpose of this guide is to show you how to begin bookkeeping, what kinds of data are available, and how to use them wisely in your small business. Before we jump on it, let’s talk about what bookkeeping is.

Different Accounting Methods and How to Choose one for your Business

By Meghan Riskowski • June 17, 2025
Different Accounting Methods and How to Choose one for your Business

Why should you outsource your bookkeeping?

By Meghan Riskowski • June 17, 2025
Start-ups, small businesses, and even entrepreneurs may encounter challenges when it comes to finding the right accountant or bookkeeper who will handle the company’s financial statements properly. Even if you’re able to prepare invoices and manage bank account operations, once your business gains traction, it can be difficult to keep up with it in the long run. It’s common for new business owners to want to do every single operation in the company. But, it’s possible to overlook and mismanage things. Handling every single task may not be effective for the growth of your business. If you’re not observing your company’s finances carefully, then it’s best to let someone else do the job for you. This is why bookkeeping services are a thing, it’s so that you don’t have a lot on your plate.

Kickstart Your Business with Smart Financial Strategies

By Meghan Riskowski • June 17, 2025
Starting a new business can be an exciting adventure, but it also comes with a lot of challenges. One of the most crucial elements of building a successful business is ensuring that you have a solid financial foundation. Smart financial strategies from the start can be the difference between thriving or struggling in the long run. Whether you’re launching a small startup or expanding your entrepreneurial endeavors, having a clear and well-organized financial plan is essential. In this blog, we’ll explore how to lay the groundwork for your business’s financial success, highlighting key strategies for new business owners, such as tracking expenses, understanding taxes, and setting up efficient accounting systems.