If you are considering changing your business entity there are some things you should consider.
- Taxes – This can be a very big consideration. There are tax differences between the various types of business entities. Every business is different. Consult with a reputable CPA to discuss your business. As a small business owner your personal finances are often intertwined with your business and you need to make sure the business entity you choose doesn’t have negative tax implications.
- Workers Compensation – the type of business entity affects when you need workers compensation insurance. Business owners often don’t realize corporate officers are included in the count for the number of employees with certain business entities even if the officers are not involved in the day-to-day business operation. Consult the industrial commission rules in the state your business is domiciled in. If your business is domiciled in North Carolina, click here to go to the industrial commission’s website.
- Function of the owners – If you are a sole proprietor it is easy to review the options and make a decision on the business entity that best fits your needs. Multiple owners make it a more complex situation. Are the owners involved in the day-to-day operations of the business or are they involved from a consultative role? It is best to review all the options and consult with a reputable attorney before you make a decision.
- Insurance – Your business insurance policies have a named insured. If you change the business entity the named insured listed no longer exists therefore your new business entity doesn’t have any insurance. Consult with your agent before the change happens so the necessary paperwork can be taken care of for a smooth transition.
- Attorney – In order to change the entity of your business you need a reputable business attorney to assist and consult with you. This is an important step in ensuring your business structure is set up properly for years to come.
For more information about the different types of business entities read this blog about the Types of Business Entities in North Carolina.