Entity type

Definition

The legal form you buy or form: an LLC, an S corp, or a C corp.

Why It Matters

It decides how the profits are taxed, what the SBA will lend against, and whether a stock sale is even possible, so it is a decision made with an accountant before the purchase agreement is drafted rather than after. Funding a purchase with retirement money forces the answer outright, because that structure requires a C corporation. The seller's form matters as much as yours: buying the assets of an S corporation and buying its stock are different transactions with different tax bills on both sides.

In numbers: The same $300,000 of profit can leave a very different amount in your pocket depending on the form, which is why an accountant's fee of a few thousand dollars before closing is the cheapest money in the deal.