Start Me Up! Choosing a Form of Entity for a New Business

The goal of kickstarting the post-pandemic economy, while resuscitating the nation’s ageing infrastructure, has taken center stage in both chambers of Congress. With infrastructure legislation likely (but not absolutely) passing in the coming months, new ventures are forming in anticipation of related energy and other tech opportunities to be spawned by the anticipated legislation. With more startups entering the economy, it’s helpful to understand how, from a tax perspective, start-ups differ from established entities. Start-up entities may generate significant losses in their early years and their founders often trade-off current salary for equity and future profits. The unique characteristics of startups make decisions like choice of entity especially critical for the startup’s entrepreneurs, employees, and investors. Practitioners should pay attention to how potential legislation to promote startups can affect their tax profile.

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