Starting a business in Oregon is an exciting time, but entrepreneurs may struggle to choose what type of legal entity to start. There is often confusion between starting an S Corporation and a limited liability company. These differences can have an impact in how the business operates and handles taxes.

Forbes provides some insight into the two common business entities. Designating the business as an S corp has tax implications but does not indicate a business structure. On the other hand, an LLC provides legal separation between the owner and the business.

Entrepreneurs not wanting to be burdened by the reporting requirements of a corporation may choose to have an LLC. A single entrepreneur may only need an S corp starting out, but then may choose to form an LLC for the protections. Entrepreneurs with an LLC can still file their taxes on a personal return rather than filing both personal and business taxes common with a C-corp.

Entrepreneur highlights the tax benefits of filing an S corporation. Business owners can file their taxes on their personal income tax returns rather than filing both business and personal taxes. The shareholders or business owners receive the losses and income passed to them rather than staying in the business. Companies composed of estates, certain partnerships, individuals, charitable organizations that are tax-exempt and certain trusts may qualify.

Keep in mind that however an entrepreneur creates their business, there may be downsides to the entity. If unsure how these entities affect the business, a business lawyer may be worth consulting.