It's always a good idea to study the different options you have for your small business' legal entity.

QUESTION.
I just started a business in which I offer my services (freelance), which include choreography, music consulting and project management, image and artist development and dance instruction. I have not completed my business plan, however I am currently working on it. I would like to get your advice on the best type of business structure I should focus on as it relates to incorporating and taxes. Although I have researched various options, I am slightly unclear as to which would be best suited for me. Your help is greatly appreciated.

ANSWER.
The choice of legal entity you choose really doesn't have much to do with paying taxes or saving on taxes. The choice you make will only determine which tax forms you have to file with the IRS and whether you are likely to get audited by the IRS. I typically advise SCORE clients there really are only two options: LLC or C-Corporation.

In your case, based on the facts you have provided me, I recommend you go the LLC route. A limited liability company will give your small business a fictitious name, limit liability exposure to you in providing your services, and probably more credibility than merely being a sole proprietorship.

You can have your LLC taxed as a sole proprietorship or as a C-Corporation. If you go the sole proprietorship route for tax purposes, then all your LLC's revenues and expenses will be reported on your personal tax return's Schedule C. This could possibly increase your chances for an IRS audit. If you go the C-corp route for tax purposes, then you will have to file a Form 1120 for the corporation and give yourself a W-2 for the income you will claim from your corporation. Don't worry about the double tax problem with C-corps because you will nodoubt give yourself a bonus at year-end which will effective zero out the income your "corporaton" would owe taxes on.

You may want to take a look at the following link? See LEARN A LITTLE ABOUT CHOICE OF LEGAL ENTITY.

I think I have answered your question. If you have a more specific question about this that you need answering, then feel free to send me follow-ons via email. Good luck! Regards, -Jeff

Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com