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What does this mean?

Yes: Your personal assets (house, car, savings) are shielded if the business is sued or owes money.
Example: If a customer slips in your store, only the business is responsible.

No: You and your business are legally the same. Personal assets could be at risk if something goes wrong.
Example: If your landscaping business can’t pay its bills, creditors could pursue your personal funds.

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What does this mean?

Pass-through (profits flow to personal tax return): Business profits and losses go directly onto your personal tax return. Simple, but you’ll likely pay self-employment taxes.
Example: A single-owner consulting business reporting income on their personal taxes.

Corporate (business pays corporate taxes separately): The business is taxed separately from you, like a large company. This can allow reinvesting profits in the business but comes with more rules.
Example: A growing tech startup paying its own corporate taxes.

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What does this mean?

Yes: You’d like to pay less in self-employment taxes by splitting income between a salary and profits (often using an S-Corp election).
Example: An online shop owner paying themselves a modest salary and taking the rest as distributions to save on taxes.

No: You’re fine paying self-employment tax on all profits for simplicity.
Example: A solo photographer who reports all income as self-employment income.

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What does this mean?

Yes: Your business meets IRS requirements (such as being a U.S.-based corporation or LLC with under 100 owners, all U.S. citizens/residents). This lets you potentially reduce taxes.
Example: A small consulting firm with two U.S. partners choosing S-Corp status to lower tax costs.

No: Your business doesn’t meet S-Corp rules. You’ll stick with standard LLC or partnership taxation.
Example: A business with foreign investors, which disqualifies it from S-Corp status.

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What does this mean?

Yes: You plan to bring in outside funding (like angel investors or venture capital). Investors usually prefer C-Corporations.
Example: A software startup looking for venture capital to scale quickly.

No: You’ll fund the business yourself or with co-owners, without raising outside money.
Example: A family-owned restaurant using personal savings and loans.

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