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Taxes – The Top Concern Of Recruiting Businesses

by | Mar 9, 2011 | Recruiter Training, Top Echelon Blog

In my previous blog post regarding business structure, I noted that the most popular structure for recruiters was the “S Corporation,” by a wide margin, as a matter of fact.  We determined that fact by conducting a survey of recruiters from all across the country.
We asked recruiters some other questions in that same survey, one of which is listed below:

When selecting the type of business structure for your recruiting company, what was the top concern in making the decision?

We gave recruiters a choice of five responses.  Those responses, along with the percentage of recruiters that chose each one, were as follows:

  • Individual (personal) liability—26.1%
  • How taxes are handled—31.5%
  • Ease of organization and administration—27.7%
  • Ownership concerns—7.1%
  • Other—7.6%

As you can see, the results were much closer when it came to this question.  However, “How taxes are handled” was the most popular response, edging out “Ease of organization and administration” and “Individual (personal) liability.”  These results aren’t that surprising, considering how much and how often tax regulations regarding business change in this country.  In addition, it makes sense that recruiters prefer a business structure that’s easy to use and also offers an adequate amount of legal protection.

However, it’s the “Other” responses that are quite interesting.  Some of those were as follows:

  • A combination of two of the choices or even three of the choices presented
  • The ease of ownership transfer at retirement
  • Health insurance (in retrospect, this one isn’t that surprising, with healthcare costs the way they are)
  • Growth potential
  • Building relationships with employers

Even more interesting were the comments that recruiters attached to the survey question.  These comments were more revealing in terms of their thought processes behind the decision they made about how they’ve structured their business.  Some of these comments are listed below:

  • “I’m structured as an LLC, but we switched from a Sole Proprietorship to an S Corp after the first year in business to save on personal income taxes.”
  • “If I had to do it over, I would have remained a sole proprietor.  Too much paperwork and reporting as a corporation.”
  • “Ownership of an LLC can be transferred much more easily when the owner goes away through retirement or other means.”
  • “I was a corporation until about 10 years ago and I got tired of all the reports and forms I had to send in.”

What about you?  If you’re a recruiting firm owner, what are the reasons that you chose the business structure that you did?  Are you happy with your decision, or do you have regrets?  What advice would you give others?

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