OldJack, thanks for taking the time to provide so much information. I think a lot of us are still scratching our heads, but have definitely learned something.

Final question going back to jlj's first post: I'm in a similar circumstance (except not a service business) - What would you do if you wanted to find a good tax accountant to advise you on how to form your business? I can look in the yellow pages, but sometimes accountants just advise you based on their own strengths and experience so that you'll hire them (e.g., I was once advised to just "stay as a sole-prop" - but my gut feeling was that the CPA just didn't have enough experience with corporate tax issues).

Thanks

That is a tougher question than the tax issue we discussed here.

Most CPA's that I have know do not charge for a first interview. I would visit several small CPA firms, by appointment, and discuss your particular business with each of them and thereby learn which CPA understood my type of business and their recommendations as to type of entity. I said small CPA firm, or individual, as your big CPA firms deal with big companies and the CPA you talk to may not know diddly-squat about small business issues. The last person to get advise from would be a lawyer although depending upon your CPA or state, you may need the lawyer to file papers to setup the entity.

Believe it or not your question of what type entity is not an easy question to determine without discussing with you things such as:

1) How you plan to operate the business (your business plan in general, not necessarily the $ ).
2) Your personal tax situation such as other income and what tax bracket you are in with & without the business.
3) Your possibility of losses in the first few years.
4) Will you have someone or are you capable of bookkeeping and records for the type of business. Different entities require a different level of record keeping. (A tax preparer isn't very interested in you as a client if you are going to just give them a box of receipts).
5) Your possible liability to customers and your opinion of paying for proper insurance.
6) Do you plan to bring in future partners and how you see that would affect your ownership.
7) Employee Fringe Benefits that you might need or not need.
8) There are many more questions but I have run out of time. The CPA will discuss all kinds of questions to help explain to you the benefits of one entity verses the other. The ultimate selection of an entity has to be yours, but a good CPA can help you with the right decision and probably at no charge.