|While there are arguments
in favor of remaining a sole proprietorship ( less cost, somewhat less
paper work) and foregoing the limited
liability you get if you incorporate a corporation or form an
LLC (limited liability company), we do not believe that there is any valid
reason (in the overwhelming majority of cases) to forego limited liability
by becoming or remaining a general partnership.
If you decide to limit your liability, you must then decide whether to incorporate or to form an LLC. The answer depends upon the state and your particular circumstances, and we can help you with that decision. Either way, you will be eligible for conventional corporate taxation at the entity level (C corporation or limited liability company electing to be taxed as a corporation), or pass-through taxation ( S corporation or a limited liability company electing to be taxed as a partnership or llc electing to be taxed like a corporation and then electing to be taxed like an S corporation). Immediately after the entity is formed, you should consult with your tax preparer before making this fundamental decision between taxation at the entity level or pass through taxation.
For information which will assist you in deciding whether to incorporate or form an LLC, see Comparisons: C corp? S corp? LLC?, or frequently asked questions about incorporation, or frequently asked questions about limited liability companies, or contact us.
Another choice is whether or not to incorporate (or form an LLC) in your home state. In most cases, you should incorporate (or form the LLC) in your home state.