Sometimes, an accountant’s error is open for all the world to see, as in the wrong envelope handed over by the PwC accountant at the Oscars on Sunday night. At other times, only the accountant, the client, and perhaps the IRS are aware of the error. That’s the case in choosing the type of entity to use when setting up a business.
It’s a crucial decision that has to be made right at the outset of the entity lifecycle. And although taxes are a significant driver in determining which entity structure to select, they are not the only factor to consider – there’s also access to capital, liability, the nature and the number of owners, Social Security and Medicare taxes, restrictions on accounting methods, the owner’s payment of company expenses, filing deadlines and extensions, multistate operations, and exit strategy, according to Barbara Weltman, author of J.K. Lasser’s Small Business Taxes.
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