The AllBusiness.com Practical Guide to Starting a Business

The AllBusiness.com Practical Guide to Starting a Business

Table of Contents


CHAPTER 1 CHOOSING YOUR FORM OF BUSINESS  1 
 Sole Proprietorships  1 
 Advantages of a Sole Proprietorship  2 
 General Partnerships  3 
 Advantages of a General Partnership  3 
 Disadvantages of a General Partnership  3 
 Limited Partnerships  4 
 Advantages of a Limited Partnership  4 
 Disadvantages of a Limited Partnership  5 
 C Corporation  5 
 Advantages of a C Corporation  6 
 Disadvantages of a C Corporation  6 
 S Corporation  7 
 Advantages of a S Corporation  7 
 Disadvantages of a S Corporation  7 
 Limited Liability Company (LLC)  8 
 Advantages of a Limited Liability Company  8 
 Making The Right Choice  9 
 Comparisons at a glance  9 
 Checklist  9 
 The Need for Funding  10 
 Other Determining Factors  10 
 Alter Ego Liability  11 
 The Answer  11 
 
CHAPTER 2 BUSINESS PLANS  12 
 Why A Business Plan?  12 
 Key Sections of a Business Plan  13 
 The Executive Summary  13 
 Company Description or Business Overview  14 
 Products & Services  15 
 Market Information  15 
 Do's & Don'ts For Business Plans  16 
 Competitive Analysis  16 
 Operational Plan or Operational Strategies  17 
 Management & Ownership  18 
 Funding Tip  19 
 Sales & Marketing  19 
 Pricing  20 
 Marketing  21 
 Targeting Your Audience  21 
 Financial Plan  22 
 Review Your Business Plan  22 
 A Mini Plan  23 
 Web Resources  24 
 Confidentiality  24 
< > 
CHAPTER 3 STARTING A CORPORATION  26 
 Choosing A Name  26 
 Picking The State of Incorporation  27 
 Publication Requirement  28 
 Costs of Incorporation  28 
 Board of Directors  29 
 Officers  30 
 Bylaws  31 
 Issuing Stock  32 
 Stock Certificates  33 
 Incorporation Kits  33 
 The Stock Ledger  34 
 
CHAPTER 4 RAISING FINANCING FOR YOUR BUSINESS  35 
 Loans  35 
 SBA loans  37 
 Stock Sales  38 
 A Private Placement Memorandum  39 
 Angel Financing  39 
 Finding Angels  40 
 Tips For Finding Angel Investors  41 
 Advantages of Lease Financing  41 
 Disadvantages of Leasing  42 
 Venture Capital  43 
 Bank Financing  44 
 
CHAPTER 5 BOOKKEEPING & ACCOUNTING  46 
 Income Statements  46 
 The Balance Sheet  48 
 Record Keeping  49 
 Inventory Records  50 
 Break Even Analysis  51 
 Budgets & Projections  51 
 Budget tips  52 
 Using Accountants & Bookkeepers  52 
 Accountants  52 
 Bookkeepers  53 
 Do's & Don'ts About Hiring Bookkeepers & Accountants  54 
 
CHAPTER 6 SMALL BUSINESS TAX BASICS  55 
 Income Taxes  55 
 "Ordinary & Necessary" Business Expense  56 
 Pass Through Taxes  57 
 Tax Deferred Retirement Plans  57 
 Sales Taxes  57 
 Payroll Taxes  58 
 Social Security & Medicare (FICA)  59 
 Some Common IRS Tax Forms You Should Know About  59 
 Employment Taxes  60 
 Federal Withholding Taxes  60 
 Unemployment Taxes  60 
 Who Qualifies As An Employee?  61 
 Tax Software  61 
 Helpful Tax Websites  63 
 Tax Planning  63 
< > 
CHAPTER 7 HIRING EMPLOYEES  64 
 Labor Laws  65 
 Pre-interview To Do List  66 
 Employment Interviews  66 
 Interview Red Flags!  68 
 Your Responsibilities  68 
 Employee Applications  69 
 Offer Letters  70 
 Do's & Don'ts of Job Offers  71 
 Employment Agreements  71 
 Confidentiality & Invention Assignment Agreements with Employees  72 
 New Employee Paperwork  73 
 Keeping Employee Records  74 
 Employee Drug Testing  75 
 
CHAPTER 8 MANAGING EMPLOYEES  76 
 Motivating Employees  76 
 The Happy Employee  77 
 5 Common Reasons Why Employees Become Disenchanted  78 
 Do's & Don'ts Of Management / Employee Interactions  79 
 Employee Incentive Arrangements  79 
 Stock Option Plans  79 
 Bonuses  80 
 Profit Sharing Plan  81 
 Retirement Plans  81 
 Personnel Policies  81 
 Hours  82 
 Security & Employee Safety  82 
 Firearms & Weapons  83 
 Drug Use  83 
 Communications & Computer Use  84 
 Vacations, Sick & Personal Days  84 
 Maternity, Paternity, Adoption, Disability & Family Leave  85 
 Sexual Harassment  86 
 Avoiding Employee Lawsuits  86 
 Taking Precautions  87 
 Parting Ways  88 
 Do's & Don'ts of Firing Employees  89 
 Settlement Agreements  89 
<page/> 
CHAPTER 9 KEY CONTRACTS  90 
 Understanding Contracts  90 
 Sales Contracts  91 
 License Agreements  92 
 Stock Purchase Agreements  94 
 Lease Gotchas  96 
 Right of First Refusal Agreements  96 
 Boilerplate  97 
 Web Resources  98 
 
CHAPTER 10 LEGAL ISSUES  99 
 Avoiding Personal Liability  99 
 Laws To Worry About  100 
 Zoning Laws  102 
 A Good Filing System  102 
 Business Licenses  103 
 Your Start-Up Business Legal & Licensing To Do List  105 
 Arbitration & Mediation  105 
 Arbitration  106 
 Mediation  106 
 
CHAPTER 11 PROTECTING YOUR INVENTIONS & IDEAS  107 
 Patents  107 
 Before Embarking On Your Patent Quest  109 
 Copyrights  109 
 Use of Copyrighted Materials  110 
 Infringement On Your Copyrighted Work  111 
 Infringement of the Copyrighted Works of Others  111 
 Trademarks  112 
 Filing Your Trademark Application  113 
 Outside of The United States  114 
 Confidentiality and Non-Disclosure Agreements  114 
< > 
CHAPTER 12 SALES & MARKETING  116 
 Market Research  116 
 Your Target Audience  117 
 Advertising  118 
 Print Advertising  119 
 Do's & Don'ts of Print Advertising  120 
 Radio  121 
 Television  122 
 Yellow Page Advertising  123 
 Billboards, Signage & Posters  123 
 Money Saving Ways To Advertise or Market Your Wares  123 
 Web Ads & Paid Listings  123 
 Promotion  124 
 Press Releases  125 
 Email Marketing  126 
 Direct Mail  127 
 Tricks of the Direct Mail Trade  128 
 Web Sites  129 
 Domain Names  129 
 Web Hosting Services  129 
 Web Site Developers  130 
 What Makes A Good Web Site?  130 
 
CHAPTER 13 INSURANCE  133 
 Liability Insurance  133 
 Occurrence or Claims-Made Policies  134 
 Property Insurance  135 
 Additional Property Coverage  136 
 Business Interruption Insurance  136 
 Deductibles  137 
 Making A Claim  138 
 Ways To Lower Insurance Premiums  139 
 Other Types of Insurance  139 
 Choosing an Insurance Company  141 
 
CHAPTER 14 OFFICE LEASES  142 
 Key Lease Terms  142 
 Types of Leases  145 
 Additional Costs  146 
 Getting Out Of A Lease  146 
 Lease Review  148 
< > 
CHAPTER 15 TECHNOLOGY & EQUIPMENT FOR YOUR BUSINESS  149 
 Computers  149 
 Setting Up Your Computer System  150 
 Tips On Setting Up Your Computers  150 
 Computer Networking Pros & Cons  151 
 Buying Your Computers  151 
 Software  152 
 Safety First  153 
 Upgrading Your Software  153 
 Pros & Cons of Upgrading  154 
 Scanners  155 
 Common Types of Scanners  156 
 Office Equipment  156 
 Buying Versus Leasing Office Equipment  157 
 Leasing Advantages  157 
 Leasing Disdvantages  158 
 Telephones  158 
 Digital or Analog?  159 
 Features  159 
 
APPENDIX A FORMS & AGREEMENTS  161 
 Contract Checklist  161 
 Checklist for Formation of a California Corporation  165 
 Offer Letter to Prospective Employee  169 
 Stock Subscription Agreement  172 
 Sample Short Form Business Plan  182 
 Checklist for Office Leases  185 
 Press Release - New Product  190 
 Sample Financial Statements  192 
 Confidentiality Agreement  195 
 Checklist for Issuing Stock  197 
 
APPENDIX B RESOURCES  199 
 Books  199 
 Magazines/Financial Newspapers  201 
 Web Sites  201 
 Software Programs  206 

The AllBusiness.com Practical Guide to Starting a Business

Sole Proprietorship
General Partnership
Limited Partnership
C Corporation
S Corporation
Limited Liability Company

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When starting out, it is important to determine what form of business will work best for your specific situation. Based on potential liabilities, tax status, ease of starting up and attracting investors, you can elect to do business as a sole proprietorship, form a general partnership, form a limited partnership, incorporate or form a limited liability company. The type of business you are starting and your future goals and aspirations for the company will be factored into your decision along with your need to raise capital.

Here, we outline the possible ways in which you can elect to structure your business, including some of the advantages and disadvantages of each form. Since every business venture is unique onto itself there is no blueprint formula that every owner of any one specific type of business to follow. Tax and liability issues, for example, will be determined in part by your own personal assets.

Sole Proprietorships

The most common and simplest form of business is a sole proprietorship. Many small businesses operating in the United States are sole proprietorships. An individual proprietor owns and manages the business and is responsible for all business transactions. The owner is also personally responsible for all debts and liabilities incurred by the business. A sole proprietor can own the business for any duration of time and sell it when he or she sees fit. As owner, a sole proprietor can even pass a business down to his or her heirs.

In this type of business, there are no specific business taxes paid by the company. The owner pays taxes on income from the business as part of his or her personal income tax payments.

Sole proprietors need to comply with licensing requirements in the states in which they are doing business as well as local regulations and zoning ordinances. The paperwork and formalities, however, are substantially less than that of corporations, allowing sole proprietors to open a business quickly and with relative ease (from a bureaucratic standpoint). It can also be less costly to start a business as a sole proprietor, which is attractive to many new business owners who often find it difficult to attract investors.

Advantages of a Sole Proprietorship:

• A sole proprietor has complete control and decision-making power over the business.
• Sale or transfer can take place at the discretion of the sole proprietor.
• No corporate tax payments
• Minimal legal costs to forming a sole proprietorship
• Few formal business requirements

Disadvantages of a Sole Proprietorship:

• The sole proprietor of the business can be held personally liable for the debts and obligations of the business. Additionally, this risk extends to any liabilities incurred as a result of acts committed by employees of the company.
• All responsibilities and business decisions fall on the shoulders of the sole proprietor.
• Investors typically won't invest in sole proprietorships.

Note: If the business is conducted under a fictitious name it is up to the sole proprietor to file all applicable forms under the fictitious name or under "doing business as" (DBA). This, however, does not mean that the business is a separate entity from a legal standpoint. The sole proprietor remains liable even if he or she is doing business under a fictitious name.

Most sole proprietors rely on loans and personal assets to initially finance their business. Some will elect to incorporate once the business has started to grow while other business owners maintain their sole proprietorship for many years.

General Partnerships

General partnerships consist of two or more partners who are both responsible for the business. They share assets, profits, liabilities and management responsibilities for running the business.

General partnerships are typically formed by individuals. They are taxed in the same manner as a sole proprietorship, meaning each partner includes business income on his or her personal income tax return. Each partner can also deduct pro rata losses from the business on his or her own individual tax return.

While general partnerships provide a means of raising capital more quickly and allow several people to combine resources and expertise several problems commonly occur including:

• Partners having different visions or goals for the business
• An unequal commitment in terms of time and finances
• Personal disputes

For these, and other reasons, general partnership agreements should be drawn up carefully with legal counsel and signed by all partners. Additionally, there should be a means of dissolving the partnership in the case of death, disability or if one partner wants out of the business for any other reason.

General partnerships can be less expensive and require less paperwork and formalities than forming a corporation, but the partnership agreement is a key element and should be drawn up with due diligence on the part of all parties.

Advantages of a General Partnership

• Shared financial commitment
• Ability to pool resources, expertise and utilize strengths
• Limited start up costs
• Few formalities (mostly applicable licenses)

Disadvantages of a General Partnership

• Partners are generally personally liable for business debts and liabilities
• Each partner may also be liable for debts incurred by decisions made by, and actions taken by, the other partner or partners
• Disagreements in management plans, operational procedures and future vision for the business
• Difficult to attract investors

General partnerships can thrive when each partner brings a specific strength to the business. If each partner takes on a defined role and there is general agreement on the business plan, goals and visions from the onset, a partnership can be advantageous. Work can get done more quickly and having several partners involved will increase the potential for acquiring resources and attracting backers. The success of such an endeavor depends largely on the personalities of the parties involved.

Limited Partnership

A limited partnership differs from a general partnership in the role and responsibilities of the partners. The limited partners typically provide capital and help arrange financing while not taking an active role in running the business.

They do, however, receive a share of the profits for their involvement as limited partners. The general partner in a limited partnership runs the operations of the business.

Most states have statutes that regulate and define the obligations and responsibilities of partners in this type of business arrangement. You are required to file with your secretary of state and must also file various reports.

The key to this partnership agreement is found in the area of liability, which falls on the general partners, and typically not on the limited partners. For this reason individuals are reluctant to be general partners. The general partner of a limited partnership can itself be a corporation or LLC to mitigate liability issues to the promoters of the limited partnership. This, however, does not mean that a limited partner cannot be part of, or have a vote in, major decisions that affect the partnership.

A limited partnership can be attractive for a limited partner who can provide funding but not expertise and does not have the time to devote to being a hands-on part of the business. Taking on the financial risk of his or her investment but not the liability risk, is also more attractive to a limited partner.

For tax purposes, a limited partnership typically works like a general partnership in that it is a pass through operation with profits passing through to the partners who then include their allocated income on their personal tax returns. Limited partnerships are often formed to acquire, operate and hold real estate.

Advantages of a Limited Partnership

• Much easier to attract investors as limited partners
• Allows for general partners to use their expertise, make key decisions and manage the business
• Limited partners can leave the business or be replaced without the need for the limited partnership to be dissolved.

Disadvantages of a Limited Partnership

• Filings, formalities and state requirements
• General partners assume personal liability

An interesting aspect of the limited partnership is that partners are able to allocate profits, losses and gains as they see fit, regardless of the equity interest of a specific partner, subject to compliance with tax laws. This too can be attractive to prospective investors.

C Corporation

The most commonly found type of corporation is the C Corporation, which is a for-profit, state incorporated business. Articles of incorporation are filed and appropriate fees are paid to set up a corporation.

The corporation is established as a unique business entity, which takes on a distinctly separate business and tax identity from that of the owners (the shareholders). Separate income taxes are filed (IRS form 1120) and corporate taxes are paid regularly for the business. In return, the business owners are typically removed from personal liability for debt incurred by the corporation. Should the business go bankrupt, or be faced with a lawsuit, the owner's personal assets are protected. This is the most significant reason why many business owners choose to incorporate. Additionally, as a separate entity, a corporation can own property, make business dealings or even sue another business independently of the shareholders.

To establish a corporation, there are several requirements and formalities that need to be addressed. For example, a corporation needs to issue shares to stockholders. In addition, state requirements usually include minutes be taken at shareholder and Board of Director meetings, appointment of officers and maintaining specific records as outlined by the state in which the incorporation documents are filed. The shareholders have ownership in the corporation, the Board of Directors governs the business and elected officers manage the day-to- day activities. Corporations must adhere to corporate tax laws and file corporate taxes regularly. While corporate taxes can be higher, initially they may be lower than that of a sole proprietor who is paying a 28% rate on his or her personal income tax. The first $50,000 is taxed at a rate of 15%.

Advantages of a C Corporation

• The corporation is a separate legal entity, and if it is adequately capitalized and proper corporate formalities are followed, the shareholders should generally have liability protection from the debts and obligations of the corporation.
• Corporations can utilize corporate benefit health plans, which often offer better retirement options and benefits than those offered by non-corporate plans.
• 100% deductible health insurance for all employees as well as group term life insurance up to a specified amount per employee
• If a stockholder dies or wishes to sell out, the corporation continues
• Easier to raise capital as a corporation than as a sole proprietorship or partnership
• Can offer employee incentive stock plans

Disadvantages of a C Corporation

• "Double taxation". This means that besides paying corporate income taxes, any dividends to shareholders are taxed again at the applicable tax rate.
• Formalities and regulations must be followed very closely in conjunction with the laws regarding incorporating in a specific state. Failure to do so can create a situation where shareholders may be held liable.
• Costlier to start than a sole proprietorship or partnership
• More time and effort to maintain

While the idea of "double taxation" is very troublesome to many new business owners, it is not usually significant for small businesses, where it is unlikely that there will be large dividend payouts. Rather, the money is paid out in the form of salaries and benefits. As the owner, you can pay yourself a reasonable salary and handle any number of duties in the corporation. By incorporating, you have the luxury of leaving some of the money in the corporation if you foresee significant personal income from other sources. This way you can reduce your own personal income tax payments.

Taking the time, making the effort and paying the additional expenses to incorporate are usually considered worthwhile by a business that foresees potential liabilities and/or seeks investors.

S Corporations

An S Corporation is initially formed in the same manner as a C Corporation, by filing incorporation documents with the state of incorporation. Once the business has incorporated, the owners may decide to file as an S corporation, within approximately 75 days of incorporating. To do so, they need to file an IRS form 2553. This does not create a separate type of corporation, but changes the tax structure of the corporation.

The S Corporation has shareholders and is taxed like a sole proprietorship or a partnership rather than a C Corporation, which is taxed as a separate business entity. Income is passed through to the shareholders who report their pro rata income, or losses, on their individual tax returns. The corporation still files a federal tax return (form 1120S) and possibly a state return as well, if required by individual state law. The S Corporation shows profits and losses as they pass through to the shareholders and the corporation generally does not pay federal income tax as a separate entity. Some states, however, do tax S Corporations in the same manner as C Corporations. Check your state tax laws before electing S Corporation status.

Advantages of an S Corporation

• Corporate losses can be passed through to the shareholders and as the owner (and shareholder) you may be able to take the loss against income that appears on your personal return.
• You can have the protection of limited personal liability without having to pay corporate taxes.
• You can minimize self-employment tax and FICA tax. Profits, as a shareholder, are not taxed in this manner.
• It is easier to raise capital as a corporation than as a sole proprietorship or partnership.

Disadvantages of an S Corporation

• Numerous regulations and requirements that must be upheld by an S Corporation including a limit on the number of shareholders (see list below).
• Like a C Corporation, it can be costly to set up and follow formalities.
• Close scrutiny by the IRS of shareholder-employees, who must receive reasonable compensation (subject to employment taxes) before any non-wage distributions may be made to that shareholder-employee.

Other regulations imposed on S Corporations include:

• All shareholders must be U.S. citizens.
• All shareholders must vote in favor of the S Corporation.
• Benefits such as health or accident insurance for employee shareholders (with at least 2% ownership) may not be deducted by the corporation.

A corporation that plans to pass through dividends regularly to shareholders, may want to elect S Corporation tax status. Also, a business owner who may want to take business losses on his or her own personal tax return, possibly to offset income earned by his or her spouse, may opt for this type of corporation. It is worth noting that if you do set up an S corporation and later decide that there is a better alternative for your business, you can vote to drop S corporation status.

Like other corporations, the S Corporation can limit the personal liability of the owners. Creditors can go after the assets of the corporation and not the owners if there are outstanding debts. It is important, however, that the owner keeps his or her personal financial records and those of the S Corporation completely separate to avoid legal entanglements.

Limited Liability Company (LLC)

The hybrid answer to choosing the form of business for your company may be to go with a Limited Liability Company (LLC), which combines the pass-through taxation of a sole proprietorship, or general partnership, with the limited liability of a corporation. A relatively new form of business, LLCs have become popular over the past ten years. An LLC operates as a separate legal entity, but without being a corporation. Therefore, there are no federal corporate taxes imposed on the LLC as a separate entity. To start an LLC, a member, or members, must file the specific forms with the secretary of state. Information that is required will include the latest date at which the LLC is to dissolve and a statement explaining whether the LLC will be managed by one manager, several managers, or the members.

What makes the LLC unique is that it is formed by members, not shareholders, who draw up an operating agreement to run the business without the structural guidelines imposed on a corporation. This allows for greater flexibility without formalities, such as Board of Director meetings, which are imposed on a corporation. While most LLCs have two or more members, in many states, a single member can now form an LLC as a legitimate business structure.

Advantages of a Limited Liability Company

• Personal liability protection for members
• No need to meet the requirements and formalities of a corporation to maintain the business status
• Members can draw up their own contract, allowing for flexibility in management and responsibilities
• Greater flexible in allocating income to members than in a corporation. For example, an LLC can have various classes of interest while an S Corporation can issue only one type of stock.

Making The Right Choice

Comparisons at a glance:
Form of Business	Tax Structure	Liability
Sole Proprietorship	Pass through	Personally liable
General Partnership	Pass through	Personally liable
Limited Partnership	Pass through	Liability protection for limited partners
Limited Liability Company	Pass through	Personal liability protection
S Corporation	Pass through	Personal liability protection
C Corporation	Corporate taxes	Personal liability protection
Form of Business	Ease of Start Up (Based on paperwork & restrictions)	Ease of Attracting Investors	Ongoing Government Regulations & Formalities
Sole Proprietorship	Easy	Difficult	Few
General Partnership	Easy	Difficult	Few
Limited Partnership	Medium	Medium	Some
Limited Liability Company	Difficult	Medium	Some
S Corporation	Difficult	Easier	Many
C Corporation	Medium to Difficult	Easiest	Many

Checklist

When deciding on which form of business will best serve your purposes you should take into account:

• Your own personal assets and liabilities
• Your existing capital and need for outside investors
• Your ability to attract outside investors
• State licensing, statutes and tax requirements
• The time commitment necessary to handle regulations and formalities
• The size, scope and type of business you are opening

Start up costs including licensing and other fees

The Need For Funding

The need for funding is one of the first concerns for any new business and unless you have the personal assets or can tap into friends, family or your bank, you will be seeking investors. Investors will look at:

• Returns on their investment
• Protection from personal liability
• Tax situation (their personal situation and that of your business)

While most businesses can only anticipate future returns, the business structure that protects personal assets and provides a favorable tax environment will be most attractive to investors. If, however, you do not need investors or are not seeking shareholders when starting up a business, you may do what many business owners have done and start small as a sole proprietor and incorporate later as the business grows.

Other Determining Factors

Determining not only the type of business you are starting, but the type of customers you will attract and the manner in which you will attract them should also be factored into your decision making process.

The potential for liability from customer relationships or interaction impacts heavily on your liability risk. For example, someone who is opening a business that will sell goods to customers via the Internet or through mail order is less likely to garner lawsuits than someone who owns physical store locations, where customer foot traffic (and potential injuries) could result in such a lawsuit. However, many small business owners opt for coverage from insurance policies rather than going through the time and expense of incorporating.

Attorneys, brokers or financial consultants offering advise and personal services may run a greater risk of a lawsuit from someone claiming they received "bad advice". It will also be assumed that a professional business such as a law firm or accounting practice will have greater assets, making them greater "targets" in a litigious society. Therefore, such a business would more likely choose a form of business that protects their personal assets. Likewise, someone who has already had previous business success and has significant assets from a previous business venture would also want to protect those assets closely.

How fast you anticipate the business will grow is also of concern when selecting your form of business. If you expect it to take several years before you see a profit, you might select an S corporation so that shareholders can offset some of their personal income with losses from the business.

While a sole proprietorship is the optimal choice for many people starting small businesses, some people select this method primarily because it provides the easiest manner in which to start and open a business quickly. Others become sole proprietors simply because they do not believe they can incorporate. Apathy can come back to haunt a successful entrepreneur. Therefore, it is wise to sit down with both an attorney and an accountant and discuss the details of the business that you are planning to start where you see it going in five or ten years. Cover all the bases including liabilities, taxes, employee benefits and the need for investors before making your decision. Then make the decision that is best for your new business from all aspects.

The Answer

So, what is the answer for the right business entity for an entrepreneur? In a nutshell:

• Stay away from sole proprietorships and general partnerships. The risk of personal liability for the debts and obligations of business are too great.
• LLCs and limited partnerships can be good for certain businesses (such as real estate), but can be complicated and expensive from a legal perspective.
• S corporations make a lot of sense if you can qualify. You can always convert to a C corporation later.
• C corporations make sense if you plan to have sophisticated investors and you don't need to worry about paying dividends.