When forming a new company, clients often ask us, “Do I need to consult a tax advisor?” While it is always a good practice to let your tax consultant know ahead of time about any changes, the level of engagement with your tax advisor will be dependent on the structure of ownership and anticipated revenues associated with your new entity. A single member LLC or sole proprietorship, outside of extraordinary circumstances, is unlikely to require sophisticated tax treatment. However, there are some general determinations that you should consider, such as whether you are going to pay yourself a salary or whether income from the entity will be treated as ordinary income. If revenue is sufficient to pay a salary, which is regular and consistent, an S Corp election for an LLC under Form 1120-S may be appropriate as suggested by your tax consultant or CPA.

Additionally, a partnership, corporation, or LLC seeking to structure itself for future private equity funding or with an unusual ownership structure, will likely require coordination between legal counsel and tax consultants to confirm that you are not subject to competing liabilities, taxation, and obligations. RR&A can help with this determination; we have saved clients thousands of dollars by either proactively engaging in conversations with tax consultants or CPAs, or by creating simple entity structures that avoid the need for unnecessary initial complexity.