Using each of the 4 criteria from the lecture, describe why you feel that the form of organization selected by your company is (or is not) in the company’s best interest.
Four of the main criteria that helped guide me in my decision to form an S-Corporation were: cost, liability, taxation and control. The S-Corporation has many advantages which work in my company’s best interest through careful evaluation of each of the criteria:
Cost: I have to admit that, at first, it was a lot of work and cost/fees to setup the S-Corporation for my business. There are many steps that are required, making it more difficult when compared to forming sole proprietorships and partnerships. I had to secure the proper formation documents, called the articles of incorporation. After that, I had to register those documents with the State of California Secretary’s Office and pay hundreds of dollars in filing fees. I could not have even started all this without the help of my accountant and attorney (more costs!). After the corporation was created at the state level, I then had to file the Form 2553 with the IRS and elect the S corporation status. It was a fairly long process, which took over 2 months to complete. However, now that I look back on the process of forming the S-Corporation, I feel that it was time (and money) that was well spent in terms of the extra tax savings and liability protection that my company receives as a result. The cost that I paid for the initial setup was in the best interest of my company and its future success. Another cost benefit is that I can always choose to change my S-Corporation status if my business becomes more profitable in the future. So to me, it is a “win-win” situation.