Whether you are starting a new business or re-evaluating
your existing business, it is important to choose the legal form best suited for you. This is an important decision since
the tax rules differ for each. We can assist in the selection and set-up as well
as provide you with ongoing guidance and support of your new business entity, at a cost well below that of an attorney.
A sole proprietorship is
an unincorporated business that is owned by one individual. It is the simplest form of business organization to start and
maintain. The business has no existence apart from you, the owner. Its liabilities are your personal liabilities and you undertake
the risks of the business for all assets owned, whether used in the business or personally owned. The income and expenses
derived from the business fall under your own personal tax return.
As a sole proprietor, you
are subject to the self-employment tax, which can be substantial.
A partnership is a relationship
between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor, or skill,
and expects to share in the profits and losses of the business. Partnerships
are subject to special and complex tax rules. However, a partnership is not a
taxable entity. Each partner includes his or her share of the partnerships income
or loss on his or her tax return and is subject to the self-employment tax
In forming a C-Corporation, prospective shareholders transfer money, property, or both, for the
corporations capital stock. A corporation generally takes the same deductions as a sole proprietorship to compute its taxable
income. A corporation can also take special deductions.
The disadvantage to a C-Corporation
is the double taxation. Profits of a corporation are taxed to both the corporation
and to the shareholders when the profits are distributed as dividends, yet shareholders cannot deduct any loss of the corporation.
LLCs (Limited Liability Company) and LLPs (Limited Liability
Partnership) are similar in many ways; however one key difference is that the LLP must be owned by more than one person, which
can pose problems by nature. The LLC is much like the S-Corporation in that it
acts as a pass-through entity, whereby avoiding the double taxation. However,
an LLC is a bit more complicated to set up with more complex tax rules to follow.
When choosing between an S-Corporation and an LLC you
need to consider many things. Every business situation is different with different
needs and expectations. Thats where we, as tax professionals and business advisors
come into play.
What we do:
Initial consultation to determine
your needs and to assist you in choosing the right business formation
Corporate name search for proposed business name
Prepare and file all required applications and forms
Obtain tax identification number
Consult with you to complete and sign all corporate documents
Step-by-step instructions on maintaining corporate shield
Professional binder of all legally required documents
Once the new entity has been created, we offer individualized
services to assist with maintaining the corporation, everything from bookkeeping to tax preparation.
Check out more details about our Accounting/Bookkeeping services.
More on the benefits of S-Corporations.