Tax Considerations in Choosing the Type
of Entity for a Business
1. Overview of Tax Considerations
Non-Tax Considerations Under State Law: State law provides a choice of entity types that provide the owners with a degree of limited liability protection. The most commonly used are for profit corporations, nonprofit coporations and limited liability companies (LLCs).
IRS Tax Considerations: The decision as to which entity type to chose, however, often hinges upon tax related considerations. The IRS has three separate regimes for taxing entities. Each regime has its own rules and regulations.
