Picking the Wrong Business Structure Could Be Costing You Thousands: Let’s Fix That.
Starting your business was the exciting part. You’re finally bringing your ideas to life. But then came the legal stuff. LLC? S-Corp? C-Corp? Which one is right?
If you’re like most entrepreneurs, you probably defaulted to an LLC because it’s easy and flexible. But here’s the thing: what worked on day one might not be the best move as your business grows.
The right business structure can save you money, protect your assets, and help you scale. The wrong one? It can leave you overpaying in taxes and stuck with limitations you didn’t see coming.
At Insogna CPA, one of the most trusted CPA firms in Austin, Texas, we help business owners make smart tax and financial decisions from the start. Let’s break it all down so you can confidently choose (or switch) to the best structure for your business.
Why So Many Business Owners Get Stuck in the Wrong Structure
Most entrepreneurs pick a business structure based on:
- What their friends or peers did (not always the best advice).
- Whatever was easiest at the time (LLCs are simple, but not always the best long-term).
- A lack of tax planning knowledge (because no one tells you when to upgrade).
The problem? Your entity type affects everything: your taxes, legal protection, and ability to raise money. And staying in the wrong structure too long could mean missing out on major tax savings or limiting your future growth.
LLC, S-Corp, or C-Corp? Let’s Break It Down.
Here’s how each structure works and when it might make sense to switch.
1. LLC (Best for New & Small Businesses That Need Flexibility)
An LLC (Limited Liability Company) is a great starting point because it’s simple, flexible, and protects your personal assets.
Best for: Freelancers, consultants, small business owners, and real estate investors.
When to reconsider:
- If your profits exceed ~$50,000 per year, switching to an S-Corp could save you on taxes.
- If you’re looking for investors, an LLC may not be the best option—venture capitalists prefer C-Corps.
2. S-Corp (Best for Business Owners Looking to Save on Taxes)
An S-Corp (S Corporation) isn’t a business type. It’s actually a tax election that lets LLCs or corporations avoid self-employment taxes on some of their income.
Best for: Business owners making at least $50,000+ in profit who want to lower self-employment taxes.
When to reconsider:
- If you plan to seek venture capital funding, investors typically avoid S-Corps.
- If you want to reinvest all your profits, S-Corps require distributions to shareholders.
Real Tax Savings Example:
Let’s say your business profits $100,000 per year.
- As an LLC, you’d pay self-employment tax on the full $100K (~15.3%, or $15,300).
- As an S-Corp, you could split that into a $50K salary and $50K distribution and only pay self-employment tax on the salary portion, saving thousands per year.
3. C-Corp (Best for Startups & High-Growth Companies Seeking Investors)
A C-Corp (C Corporation) is ideal for businesses that plan to raise venture capital, offer stock options, or reinvest profits into growth.
Best for: Startups, tech companies, and businesses planning to go public or scale big.
When to reconsider:
- If you’re a small business or solo entrepreneur, C-Corp taxes can be higher due to double taxation (corporate profits are taxed and so are dividends).
- If you don’t need outside investors, an S-Corp or LLC might be more tax-efficient.
Tax Consideration:
C-Corps pay a flat 21% corporate tax rate, which is lower than some personal income tax rates. But, if you take dividends, they’ll get taxed again on your personal return. Tax planning is crucial before making this switch.
When Should You Make the Switch?
- If your LLC profits exceed ~$50K per year, switching to an S-Corp can save you thousands in self-employment taxes.
- If you’re seeking venture capital or planning to scale big, a C-Corp is the best choice.
- If your tax situation has changed, a CPA can help determine if your current structure is still working for you or costing you money.
How a CPA Can Help You Choose the Right Structure (And Save on Taxes)
Choosing the right structure isn’t just about legal paperwork. It’s about maximizing tax savings, protecting your business, and planning for growth.
At Insogna CPA, one of the most trusted CPA firms in Austin, Texas, we:
- Analyze your business profitability to see when an S-Corp or C-Corp makes sense.
- Calculate tax savings opportunities so you can keep more of what you earn.
- Plan for future growth & investor needs to make sure you’re always in the best structure.
- Handle all the IRS paperwork & compliance so you don’t have to stress about deadlines.
Let’s Make Sure You’re in the Right Business Structure
Your business structure isn’t a one-and-done decision. It should evolve as your company grows. The sooner you optimize it, the more you save.
At Insogna CPA, an expert CPA firm in Austin, Texas, we make sure your LLC, S-Corp, or C-Corp decision is working for you and not against you...
Let’s talk strategy. Schedule a consultation today!