Maintenance
Part of Entity type selection: a complete practical guide for 2027
Entity type selection checklist: 12 points to review in 2027
Entity type selection checklist: the facts about owners, money, risk and upkeep to assemble before the paid conversation that actually decides it.
An hour with an accountant or a lawyer is worth a great deal if you arrive with the facts, and almost nothing if you arrive with questions they have to ask you and wait for.
This is not a filing checklist. It is a list of twelve things to have written down before the conversation, and a note on why each one changes the recommendation. Work through it and you will also find the gaps in your own plan, which is the more valuable output.
Nothing here is advice. It is preparation for getting advice, which is a different thing.
What to take away
- General orientation on registering a business is at the SBA's guide, and the federal tax side starts at the IRS's pages for new businesses.
- Work through it and you will also find the gaps in your own plan, which is the more valuable output.
About the owners
1. Every person or entity that will hold ownership, and the exact percentages.
Not "we'll split it fairly." Numbers. Ownership determines which forms are available, which tax classifications you qualify for, and what happens in a disagreement. Round numbers agreed early are better than precise numbers agreed late.
2. Whether any owner is not an individual US person.
Another company, a trust, a partnership, or someone who is not a US taxpayer. Certain tax classifications carry eligibility restrictions on who may own an interest, and this is the fact most likely to invalidate a plan that otherwise looked fine.
3. Who actually works in the business, and who only invests.
Working owners and passive owners are treated differently on both the liability side and the tax side. If someone is putting in money but not time, say so at the start: it changes which structures are worth discussing.
4. What happens when an owner leaves, in the version you have already discussed.
Even a rough answer is useful: can they sell, to whom, who values it, what happens on death. If you have not discussed it, write that down too. It is the most common gap and the most expensive one to leave open, see partnership formation for the full set of questions.
About the money
5. Roughly what the business will earn, and how variable that is.
Approximate is fine. This decision is partly arithmetic, and the arithmetic behaves differently at different scales and with different volatility. A structure that suits steady income can be poor for lumpy income.
6. Whether profit stays in the business or comes out.
Reinvestment versus distribution is one of the strongest drivers of the tax conversation. Say which you expect, and whether that changes after the first couple of years.
7. How the owners intend to be paid: wage, share of profit, or both.
And whether the profit split matches the ownership split. It does not have to, and if you want them to differ, that intention needs stating before a structure is chosen rather than after.
8. What you already owe, and what you have already signed.
Loans, leases, equipment finance, and above all any personal guarantee. Guarantees do not disappear when an entity is formed, and existing obligations shape what a restructure can achieve.
About the risk
9. The specific ways this business could cause a loss.
Not a general worry: the actual mechanisms. Can someone be physically hurt? Do you hold client money or property? Could a piece of professional work cause someone a financial loss? Do you have vehicles, premises, or staff? The list determines whether liability separation is the main event or a side issue.
10. The largest contract or commitment you expect to sign.
The question behind it: is there a plausible claim you could not absorb personally? That is the threshold at which the structure stops being administrative.
11. What insurance you have or have been quoted.
Bring the quotes. An entity decides who a claim lands on; insurance decides who pays it. Advisors frequently find that the coverage question matters more than the entity question, and they can only tell you that if they can see both.
About the running of it
12. Where the business, its people, and its customers are, and what maintenance you will realistically do.
Two things in one, because they interact. Operating in more than one place can mean registering in more than one place, with the recurring obligations of each; state filing guides explains how to read what a state expects. And be honest about the admin: separate accounts, separate books, recurring filings, records of decisions, possibly payroll. A structure you will not maintain gives you cost and false confidence instead of protection.
What to bring, in one page
Condense the twelve answers into a single page before the meeting:
- Owners, percentages, and roles
- Anything unusual about who the owners are
- Expected income and its variability
- Whether profit stays in or comes out, and how owners get paid
- Existing debts and any personal guarantees
- The main loss mechanisms, and the largest exposure
- Insurance held or quoted
- Locations of the business, the people, and the customers
- Honest assessment of maintenance capacity
- The one thing you are most unsure about
That last line matters. Advisors are good at the question you did not know how to ask, but only if you tell them where you feel uncertain.
Where to look things up yourself
General orientation on registering a business is at the SBA's guide, and the federal tax side starts at the IRS's pages for new businesses. Both will send you to your own state for the specifics, which is the correct answer, anything with a fee or a deadline attached should come from the responsible authority's own page and be rechecked on the day you rely on it.
For the order in which to make the decisions themselves, the entity type selection guide sets out the sequence. If the answer turns out to be a limited liability company, the steps that follow the decision are in forming an LLC.
Common questions
Do I need both an accountant and a lawyer?
For a single-owner business with modest exposure, an accountant is usually the higher-value first call. As soon as there is more than one owner, or a contract large enough to hurt, the legal side stops being optional.
Can I do this before I have any revenue?
Yes, and it is often cheaper to. Answering these questions early costs an evening. Answering them after a dispute costs considerably more.
What if I do not know the answers yet?
Write "not yet decided" rather than inventing something. An honest gap is a useful input; a guess presented as a fact leads to a recommendation built on it.
Is this list complete?
No, and it is not meant to be. It is what makes the first conversation productive. The advisor will have follow-up questions specific to your trade, and those are the ones worth paying for.