Can an LLC, LLP or C-Corp Be Used to Finance Your Small Business Start Up With a BORSA Plan?

Deciding whether you should choose a C-Corporation, an LLC or and LLP can be confusing- but only a C-Corp can help you finance your small business start up with a BORSA plan. Each of these business structures have advantages and disadvantages and you should understand each of them before you make a decision.

An LLC is a Limited Liability Company and it has a distinct advantage over sole proprietorship. One of the most important differences is if your small business should become embroiled in a debt, those with a sole proprietorship can be subject to losing not just their business assets, but their personal assets as well. Also, in most states, an LLC can have as many owners, called members, as you choose, or you can be the sole member. However, some businesses such as banks and insurance companies cannot form an LLC.

When it comes to tax time, an LLC that is owned by one member is considered a disregarded entity. This means that the fact that there is an LLC is ignored for the purpose of filing a federal tax return. However, when an LLC has several members, most of them will be subject to self-employment taxes.

An LLP is a Limited Liability Partnership. With an LLP, you must have at least two partners. An LLP provides all partners protection from liability due to the actions of any other partner or from employees under another partner’s supervision. An LLP is taxed just like a general partnership, but some states do treat them as a limited partnership. Businesses that provide personal services may do especially well with an LLP.

An alternative to the LLC or LLC is the C-Corporation structure. In a C-Corp, as in the other business structures, there are both advantages and disadvantages. Most people would consider the biggest disadvantage to be that a C-Corp is subject to what is known as a double-tax entity. This means that the corporation is taxed as well as the individual.

However, there are many advantages to choosing a C-Corp structure for your small business. A C-Corp can have an unlimited number of shareholders, while an S Corp is limited to 100. C-Corps can be owned by other corporations, LLCs, partnerships or trusts. Also, a C-Corp is the only option if you want to publicly trade shares in your organization. A C-Corp is a separate legal entity and if capitalization is adequate and proper corporate procedures are followed, shareholders should have protections against any debt or obligations incurred by the C-Corp.

Another great advantage of a C-Corp is that it is the only structure that can be used to fund a BORSA account. A BORSA (Business Owner’s Savings Account) is a legal structure that lets you fund the purchase or recapitalization of a business, franchise or business startup using the funds in a qualified account like your 401(k), 403(b), 457 or IRA. In addition, a BORSA allows you to use those retirement funds without any distributions, taxes, penalties or loans.

If you are looking for capital to purchase or recapitalize your business, get in touch with DRDA/CPA today and find out if a BORSA is right for you. DRDA/CPA are experts at creating BORSA plans, so why not get started today? Call 281-954-6040 today and set up your own BORSA and end your business financing worries today.