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Corporations: yea or nay?

August 25, 2009

Robert D Flach takes on the entrepreneur's eternal question, looking at the advantages and disadvantages of incorporation.

My view:

Which entity is best? That's a discussion to have with your tax advisor. If you don't know what to do, start with the partnership or proprietor formats; if nothing else, they are the easiest formats to change. C corporations are the only ones that can cause your income to be taxed twice -- when earned and when distributed -- so make sure you really know what you're doing before you go that way.

I would add the famous Bittker and Eustice admonition:

Decisions to embrace the corporate form of organization should be carefully considered, since a corporation is like a lobster pot: easy to enter, difficult to live in, and painful to get out of.

Flickr image courtesy walrusoflove43