Getting Started How should you operate and structure your business It can be difficult so ask for help Consult with a CPA to learn Filing and compliance issues Tax benefits and detriments Tax and NonTax Issues to Consider ID: 466109
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Selecting the Right Structure for Your BusinessSlide2
Getting Started
How should you operate and structure your business?
It can be difficult, so ask for help.
Consult with a CPA to learn:
Filing and compliance issues
Tax benefits and detrimentsSlide3
Tax and Non-Tax Issues to Consider
Ownership and continuity changes
Legal liability protection
Federal and state income taxes
Social Security taxes
Other factorsSlide4
Structuring for Success
Sole Proprietorship
Single Member Limited Liability Company
Partnership – General and Limited
Corporation – S or C
Limited Liability CompanySlide5
One-person business
Not registered with state as limited liability company or corporation
Some states require license or permit
Owner is personally liable
Simplest for tax purposes
Business ceases to exist with death of owner
Sole ProprietorshipSlide6
One-person business
Registered with state as limited liability company
Some states require license or permit
Owner may not be personally liable
Simplest for tax purposes
Business ceases to exist with death of owner
Single Member LLCSlide7
Partnership
A relationship between two or more persons
Not classified as a corporation
Agreement addresses potential concerns
Hire an attorney to write up the agreementSlide8
Partnership (Continued)
General
Responsible for partnership liabilities, no matter which partner incurred them
Limited
Only liable to the extent of partnership investment
Partnership Agreements should cover:
Income and loss allocations
The events that trigger a buyout and a buyout priceSlide9
Corporation
Considered separate from owners and managers
Independently liable
Owner’s personal assets are protected
No limit on number of shareholders in C corporationSlide10
Corporation (Continued)
Small Corporation
Creditors may require guarantees
C Corporation
The company is taxed
Personal Service Corporation (PSC)
Engaged in performance of personal services
S Corporation
S status with the IRS under state lawSlide11
Limited Liability Company (LLC)
Taxed as a partnership, but provides members with liability protection like a corporation
Only the LLC’s assets are at risk
Pass-through entity
Income passes through business to LLC membersSlide12
Limited Liability Company (LLC) (Continued)
Operating agreement
Determines how income is allocated among members
Gives more flexibility than S Corporation
File Form 1065
An informational return with the IRS
Reports on members’ income tax returnsSlide13
Sole Proprietorship
Reports on Form Schedule C on federal Form 1040
Partnership
Pass-through entity; Form 1065 and Schedule K-1
S Corporation
Taxed like a
partnership; Form
1120S and
Schedule K-1C CorporationTwo levels of taxation; Form 1120 and tax on dividends, if any, on Form 1040Tax ConsiderationsSlide14
Compensation and Payroll Taxes
Key issue facing small businesses:
Wage income vs. self-employment income
Sole proprietors may prefer to pay themselves in the form of wages
Health care considerations
Retirement
plan considerationsSlide15
Thank you!