Entity Structure & Tax Elections

ENTITY STRUCTURE & TAX ELECTIONS

Sole proprietorship, LLC, partnership, S corporation, or C corporation — choosing the structure that fits your business today, and knowing when to change it.

The way your business is organized affects how much tax you pay, how you pay yourself, what returns you file, and how easy it is to bring in partners or sell later. Many business owners choose a structure when they start and never revisit it. At Victoria Bogdanovich CPA, we help new and growing businesses choose the right entity and tax election, and we revisit the question as your profits change.

The main options

Sole proprietorship or single-member LLC. The simplest setup: business income is reported on Schedule C of your personal return, and all net profit is subject to self-employment tax. In Texas, an LLC generally files an annual franchise tax report. See Self-Employed & Single-Member LLCs.

Partnership or multi-member LLC. The business files Form 1065 and issues K-1s to each owner. Flexible for splitting profits among partners, but the partnership agreement matters.

S corporation. An LLC or corporation can elect S status. Owners who work in the business are paid a reasonable salary through payroll, and remaining profit can be distributed without self-employment tax. It adds payroll, a separate return, and more recordkeeping. See S Corporation Owners.

C corporation. The company pays its own income tax, and dividends are taxed again to shareholders. It can fit businesses that plan to reinvest profits, raise outside capital, or sell stock in the future.

When to revisit your structure

• Your profit has grown significantly since you started
• You’re bringing in a partner or investor
• You’re buying real estate or a second business
• You’re planning to sell the business in the next few years
• You’ve moved, or your business now operates in other states or countries

Elections we help with

• S corporation election (Form 2553) — including relief for late elections
• Entity classification (Form 8832) — choosing how an LLC is taxed
• Accounting method and tax year elections for new businesses
• Payroll setup after an S election, coordinated with your bookkeeping

How to get started

New or prospective business owners: book an Initial Consultation ($295, 40 minutes, credited in full if you hire us). We’ll review your plans and numbers and recommend a structure.

Existing tax clients: entity reviews are part of year-round support, or can be quoted as a separate project.

Filing elections, forming new entities, and payroll setup are quoted separately.

Book an Initial Consultation

Frequently asked questions

Does an LLC save me taxes?
Not by itself. A single-member LLC is taxed like a sole proprietorship unless it elects otherwise. The legal protection may be valuable, but the tax savings come from the election, not the LLC.

At what profit level does an S corporation make sense?
There’s no single number. It depends on the salary you’d need to pay yourself, your other income, and the added cost of payroll and a separate return. We run the numbers for your situation.

I missed the deadline for the S election. Is it too late?
Often not. The IRS provides relief for late elections in many cases if certain conditions are met. We’ll review whether you qualify.

Can I change my structure later?
Usually yes, but some changes have tax consequences — especially converting a corporation back to an LLC or moving appreciated property. Plan before you change.

Already a business owner looking for tax preparation? See our Business Owner Package or take the 1-minute fit check.