How to Choose the Best Business Entity for Your Startup

Starting a new business is exciting, but choosing the right business entity can feel overwhelming. It’s one of the most common questions we hear from entrepreneurs, and for good reason. Many business owners receive advice from well-meaning sources who don’t ask the right questions, or more importantly, don’t ask about the end game.

There are many business entities to choose from, including LLCs, LLPs, Limited Partnerships, S Corporations, C Corporations, and others. While the list can feel daunting, most closely held operating businesses ultimately narrow the decision to an LLC or an S Corporation.

Even with fewer options on the table, the decision is rarely simple. There are numerous factors — tax-related and otherwise — that should be carefully considered before moving forward.

Key Questions to Consider When Choosing a Business Structure

It’s understandable that many founders want to minimize upfront costs when forming a business. However, those same business owners almost always want to reduce taxes, maximize deductions, and preserve flexibility, which are all goals that require thoughtful planning.

Some of the most important questions to consider include:

• How many owners will there be at the start?
• Is it possible you’ll add owners in the future?
• Are any current or future owners non-U.S. residents?
• What type of business are you starting — service-based or capital-intensive?
• Will the business require debt to operate?
• Will you be actively involved in day-to-day operations?
• Do you plan to sell the business at some point?
• Will the business have foreign operations or subsidiaries?
• Do you expect taxable losses during the early years?

The answers to these questions often begin to point toward one entity type over another, but the analysis shouldn’t stop there.

Who Should Own the Business? A Commonly Overlooked Question

Another critical (and often overlooked) consideration is ownership. While the natural answer may be “me,” it’s important to also evaluate opportunities related to estate planning, liability protection, and long-term wealth strategy.

A knowledgeable, forward-thinking advisor may discuss options such as:

• Using a trust as the owner of the business
• Exploring a family limited partnership if multiple family members are involved

These strategies can provide meaningful benefits when structured properly and aligned with your long-term goals.

Is It Time to Work With a Trusted Advisor?

Choosing the right business entity is not a decision that should be made casually. While it’s easy to find charts comparing entity types online, those summaries rarely address the nuances that matter most to your situation.

At MGA, we don’t believe in one-size-fits-all answers. Our role is to help you navigate the complexity, ask the right questions, and arrive at a solution that supports both your current needs and your future growth. Whether you’re starting a new business or re-evaluating an existing one, we’re here to help you determine the structure that offers the most flexibility, protection, and opportunity moving forward.

We work side-by-side with you, focused on solving your specific challenges.

Have questions? Let's connect.