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Sole Proprietorship
Pros:
Easy to start and manage
Inexpensive
No separate tax returns, business gains and loses are reported in your personal income tax returns
Flexible to manage, it gives you complete control
Business expenses and loses are tax deductible
Cons:
Unlimited personal liability for business debts and lawsuits
Illness can endanger your business
Difficult to find investors
May be at a disadvantage attracting employers [...]
Wed, September 26 2007 » Business Structures, Tips » 5 Comments
LLCs have an easier time finding financing than partnerships and sole proprietorships because they offer a formal structure for investors and lenders. Moreover, a LLC offers flexibility to distribute gains disproportionately to investment in the business. (As stated previously, this must pass IRS special allocation tests.)
There are a number of financing issues involving LLCs, including:
The [...]
Wed, September 26 2007 » Business Loans, Business Structures, Find Investors, Limited Liability Company » 1 Comment
For a single-owner LLC, you just need to add a Schedule C, “Profit or Loss from Business,” (available at http://www.irs.gov) and submit it with your tax returns. For a multi-owned LLC, you will need to file Form 1065, “U.S. Return of Partnership Income” (same as with partnerships). Furthermore, the members of the multi-owned LLC need [...]
Wed, September 26 2007 » Business Structures, Limited Liability Company, Taxes, Tips » 1 Comment
Maintaining Corporate Identity
It is important to separate the identity of the corporation from its owners. This will help you protect your limited liability status. Ensure that you:
Make all annual filings with the Secretary of State.
Operate the company under its name, making sure that the people doing business with your company know that the company is [...]
Wed, September 26 2007 » Business Structures, Limited Liability Company, Tips » 1 Comment
As with corporations, there are certain exceptions to the limited liability protection afforded by the LLC:
· The LLC defaults on a loan that an owner personally guarantees.
· The managers do not deposit the taxes withheld from employee wages.
· A member injures someone.
· The owner does not separate the corporation as an independent entity; that is, [...]
Wed, September 26 2007 » Business Structures, Limited Liability Company, Tips » 1 Comment
Creating an LLC Operating Agreement
The LLC operating agreement allows you to coordinate your financial, operational, and working conditions with your partners. As with a partnership, the LLC lets you elect to run your company with your rules and not by the default rules set your State (which would come into affect if you did not [...]
Wed, September 26 2007 » Business Structures, Limited Liability Company » 1 Comment
The Limited Liability Company (LLC) is a business structure that affords the limited liability protection of a corporation and the management flexibility of a sole proprietorship or a partnership. In case of a lawsuit or unpaid debt, only the business assets are at risk.
In contrast with a business set up as a corporation, a LLC [...]
Wed, September 26 2007 » Business Structures, Limited Liability Company » 1 Comment
Corporations have an easier time finding financing than partnerships and sole proprietorships because they offer a formal structure to investors and lenders. Investors know how much they own of a corporation by the number of shares they purchase and lenders know that the corporation’s formal structure requires more checks and balances than the other business [...]
Tue, September 25 2007 » Business Loans, Business Structures, Corporation, Find Investors » 4 Comments
An S-Corporation’s earnings will pass through to your income taxes (no double taxation). However, you will have to maintain all the business records and comply with state regulations.
Owners of an S-Corporation pay FICA on shareholders’ salaries, but do not pay for distribution of profits and earnings. The S-Corporation shareholder does not pay self-employment taxes on [...]
Tue, September 25 2007 » Business Structures, Corporation, Taxes » 2 Comments
Setting up as an S-Corporation allows you to have the limited liability of the regular corporation and the pass-through taxation of a sole proprietorship or a partnership. In other words, you pay taxes from corporate income on your personal income taxes. Nowadays, for a small entrepreneur, it is more convenient to set up a Limited [...]
Tue, September 25 2007 » Business Structures, Corporation » 1 Comment
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