Title

Asheville Business Lawyers

…..

NC Business Entity Considerations

“What type of company should I form?”

This question is the most frequently asked question when forming a new business. Of course, there are many factors to consider when choosing the type of business entity.For example, factors affecting Asheville business include funding, number of shareholders, tax treatment of the entity, how investors will realize gain or income from their investment, the time horizon for the company, and many others.Fisher Stark, P.A. offers the chart below to help our clients consider and select the right entity for their new business venture. But please note we have only addressed a few of the issues to consider when forming a new company.

Considerations	C Corporation	S Corporation	Sole Proprietor	Partnership	Limited Liability Co.
1. Formation:
A. Method	Articles of Incorporation	Articles of Incorporation	None	Partnership agreement; certificate filings for limited partnership	Articles of Organization
B. Owner Eligibility
1. Number of Owners	No limit	100	One	Two or more if general partnership; one or more general and one or more limited for limited partnership	One or more for formation of NC LLC; no limit after formation
2. Type of Owners	No limitation	Individuals and certain trusts	Individual	No limitation	No limitation
3. Affiliate Limits	No limitation	No subsidiaries (except some holding)	No limitation	No limitation	No limitation
C. Capital Structure
1. Equity	No limitation (multiple classes permitted)	Generally one class of stock except non-voting class allowed	No stock	No limitation (multiple classes permitted)	No limitation (multiple classes permitted)
2. Debt	No specific limits but debt/equity ratio may affect tax status	Safe-harbor for debt	No specific requirements	No specific limits	No specific limits
D. Status Determination
1. Election by Entity	No election requirements	Required IRS election	No election requirements	No election requirements but state law filing; limited, must meet safe-harbor	No election requirements; must meet safe-harbor
2. Owner Consents	None required	Consent required	None required	None required	None required
E. Liability	Limited to shareholder’s capital contributions	Limited to shareholder’s contributions	Unlimited	General partners jointly and severally liable; limited partners are generally limited to capital contributions	Limited to member’s capital contribution
F. Continuity of Existence	Perpetual	Perpetual	Limited to life of owner	Specific agreed term; may be terminated earlier by death, disability or insolvency	Specific agreed term; may be terminated earlier by death, disability or insolvency
II. Income Tax Issues:
A. Management	Board of Directors, officers	Board of Directors, officers	Owner	All general partners, managing partners may be appointed	Members or Manager
B. Tax year	Any year permitted (limited for personal service corporation)	Generally calendar year	Calendar year	Generally calendar year	Generally calendar year
C. Tax Income	Corporate level	Shareholder level	Individual level	Partner level	Company level
D. Elections	Corporate level	Corporate level	Individual level	Partnership level	Corporate level
E. Allocation of Income of Owners	Not permitted (except through multiple equity structure)	Not permitted (except through debt/equity structure)	N/A	Permitted if substantial economic effect	Permitted if substantial economic effect
F. Character of Income	No flow-through to shareholders	Flow-through to shareholders	Flow-through to individual	Flow-through to partners	Flow-through to members
G. Investment Interest	No limits	Shareholder investment interest limited to net investment income; corporation investment interest flows through	Limited to new income	Partner investment interest limited to net investment income; partnership investment interest flows through	Member investment interest limited to net investment income; LLC investment interest flows through
H. Net Operation Losses	No flow-through	Flow-through to shareholders (limited to basis); no basis for debts guaranteed	Flow-through to individual	Flow-through to partners (limited to basis)	Flow-through to members (limited to basis)
I. Net Capital Losses	No flow-through, but five year carry forward	Flow-through to shareholders	Flow-through to individual	Flow-through to partners	Flow-through to members
J. Undistributed Earnings	Surtax on accumulations of earnings in excess of reasonable requirements for current and future business needs; $250,000 safe-harbor	No restrictions	N/A	No restrictions	No restrictions
K. Effects of Statutory Limitations	Impose at corporate level	Imposed at shareholder level	Imposed at individual level	Imposed at partner level	Imposed at member level

Western North Carolina Business Lawyers Who Care

Avoiding trouble in the future means contacting an experienced Asheville business lawyers like those at Fisher Stark, P.A. today. Fisher Stark, P.A., is based in Asheville, NC, but also serves surrounding communities throughout Western North Carolina, including Buncombe County, Henderson County, Madison County, Haywood County, Polk County, McDowell County, Jackson County, Swain County, Transylvania County, and Cherokee County. We assist new businesses. growing businesses and dissolving businesses. We serve local companies, partnerships. and entrepreneurs. Call (828) 505-4300 or contact us here for a free consultation today.

Not Ready Yet?

Experience Matters

Asheville NC Attorneys, Perry Fisher, Brad Stark, and Megan Silver will assist you with your personal injury, property loss, and court-related issues

Call Now
828-505-4300