Pick An Entity

Pick An Entity

Once an entrepreneur has developed a business plan, the next step is to pick a business entity. Picking the right business entity is a very challenging ordeal, because there are many qualitative as well as quantitative factors to consider.

I have designed a web based decision making tool, to help aid budding entrepreneurs select the right business entity.

In making this decision tool, the following assumptions are made for the planned users:

  • Your business makes a profit in at least three of the last five tax years, including the current year (or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses)

  • You materially participate in an activity if you are involved in the operation of the activity on a regular, continuous, and substantial basis.

  • If your business falls under the real estate profession, it is assumed you meet the qualifications under IRC ァ 469(c)(7) & Reg. 1.469-9. Which states that the taxpayer spends the majority of his/her time in real property businesses, meeting the 1/2 personal services and 750-hour tests. If you don稚 meet this requirement, your business is considered a passive activity. For a passive activity based business, an LLC or an LP will be the more suitable entity choice.


The foregoing is intended for educational purposes only and does not constitute legal or professional advice. Nothing contained herein is intended to be used, or can be used, by any person to avoid penalties that may be assessed under federal or any state law.

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