Selecting the correct structure for running your business is the first step. Our firm has been assisting companies and individuals with this decision since 1984. Generally, the liability protection is the foremost concern when choosing a business entity. However, we will analyze for you the projected tax savings versus the compliance cost of choosing the type of organization that best fits your needs. In certain situations we may be able to refer you to a local law firm for certain legal needs.
Sole Proprietor
Business, usually unincorporated, owned and controlled exclusively by one person. Such a business is commonly designated a “sole proprietorship”. This type of organization does not offer liability protection. However, the structure is easy to start and has a low cost to maintain. Its’ tax reporting consist of a Schedule C which is part of the individual tax return.
Corporate Entity
The distinct status of a corporation which sets its existence apart from the individual status of its shareholders is its capacity to have a name of its own, to sue and be sued in its own name as well as the right to buy, sell, lease and mortgage property in its own name.
This artificial person or legal entity created by or under the authority of the laws of generally a state is composed of one or more shareholders.
- TAX REPORTING
- C – Corporation – Form 1120
For tax purposes, this organization pays corporate income taxes and generally issues dividends to its shareholders. This type of structure has a double taxation in that this entity pays corporate tax and then when property is distributed to its shareholders it is taxed again on the individual level.
- S-Corporation – Form 1120-S
For tax purposes, this organization allows for a pass through of profits to its’ shareholders thereby eliminating the corporate tax. Generally, this
type of structure has “reasonably salaries” to its shareholders and the remainder is distributed to its shareholders and is taxed at their individual rates.
Limited Liability Companies
A limited liability company, an LLC, is a hybrid between a partnership and a corporation. Like partnerships and corporations, the limited liability company has a separate legal entity from its members. Traditionally, an LLC does not live indefinitely. Standard articles of organization must specify on which date the LLC’s existence will terminate. However, many states now allow an LLC to have a perpetual existence. This is a relatively new type of business organization in that they have gained more accepted use in the last ten years. The problem is that all other things are quite often not equal. The laws, taxation policies, reporting requirements and other applicable factors in a particular state may well outweigh the inherent advantage of the LLC and dictate incorporating instead, rather than forming an LLC. There is an operating agreement with this type of organization.
- TAX REPORTING
- C – Corporation – Form 1120
For tax purposes, this organization pays corporate income taxes and generally issues dividends to its members. This type of structure has a double taxation in that this entity pays corporate tax and then when property is distributed to its shareholders it is taxed again on the individual level.
- S-Corporation – Form 1120-S
For tax purposes, this organization allows for a pass through of profits to its’ members thereby eliminating the corporate tax. Generally, this type of structure has “reasonably salaries” to its members and the remainder is distributed to its members and is taxed at their individual rates.
- Partnership – Form 1065
For tax purposes, this organization allows for a pass through of profits to its’ members thereby eliminating double taxation.
- Sole Proprietorship – Schedule C
It's tax reporting consist of a Schedule C which is part of the individual tax return.
Partnership
This is a voluntary contract between two or more competent persons to place their money, effects, labor and skill, or some or all of them. This type of structure generally does not provide for a liability protection and has essentially been replaced with the LLC’s.
TAX REPORTING - Form 1065
For tax purposes, this organization allows for a pass through of profits to its’ members thereby eliminating double taxation.
Joint Venture
A legal entity in that the nature of the partnership is engaged in the joint prosecution of a particular project for profit. Unlike a partnership, a joint venture does not entail a continuing relationship among parties once the project is complete.
TAX REPORTING - Form 1065
For tax purposes, this organization allows for a pass through of profits to its’ members thereby eliminating double taxation.
Estates
A term commonly used to denote the sum total of all type so property owned by a person at a particular time for the benefit of the beneficiaries.
TAX REPORTING – Form 706//1041
Trusts
A right of property, real or personal, held by one party for the benefit of another or others.
TAX REPORTING – Form 1041//Form 5500
Not For Profits
Non-Profit Corporations and Home Owners Associations operate with no income benefiting its’ members, directors or officers. Non-profit entities and Home Owners Associations operate for the sole benefit of a qualified organization. A non-profit organization may be exempt from federal income tax, but is still required to file tax returns.
TAX REPORTING – Form 990//Form 1120H
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