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Me and You and Us: Deciphering Business Structures
Business structures are tough to determine especially for those newbies out there. For example, if you’re a handyman going it alone and bring your son-in-law aboard as an employee, should you make it a partnership or stick to being a sole proprietor?
Can you form a one-person limited liability company (LLC) and is there any advantage over a Subchapter S Corporation over a LLC or C Corp? Beyond that, there are certain regulations for each type of business structure and it you don’t understand what they are, you could be forming the wrong entity only to find out you don’t qualify.
Take the guesswork out of how to structure your business with this easy guide. However, before we compare one versus another, let’s take an in-depth look into each entity.
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Perhaps the easiest business structure to form, the sole proprietorship definitely has its pros and cons. This next group of articles walks you through the ins and outs of a sole proprietorship, how to start one and how to determine the advantages and disadvantages of this type of business entity.
You’ll also find a free tax worksheet for a sole proprietorship to help you when it’s tax time and discover why you will need to file a Schedule C along with your 1040 return. There are other items to consider as well such as learning about self-employment tax. Do you need to cover yourself or any employees you hire under a sole proprietorship by offering unemployment insurance? Find out here:
- The Simple Way to Start – Sole Proprietorship
- How to Start a Sole Proprietorship
- Pros and Cons to a Sole Proprietorship
- Everything You Ever Needed to Know About Sole Proprietorship
- How to Pay Yourself if You’re a Sole Proprietor?
- Free Tax Worksheets for Sole Proprietorship
- Do You Have to Pay Unemployment Insurance if You Have a Sole Proprietorship?
- Self-Employment Tax – What You Need to Know
- Why You Need to File a Schedule C With Your 1040 Tax Return
- What Are the Benefits of Running Your Very Own Business?
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Limited Liability Companies (LLCs)
The Limited Liability Company has been around for quite some time now but it is still the most favorable entity out there based on the number of LLCs formed every year—and they’re increasing. The largest downside to LLCs is because most partners look at these business structures as having “limited personal liability" so they assume that their personal assets remain safe. This is not always the case especially if you’ve signed personal guarantees on loans or equipment leases.
Learn the pros and cons here. We also provide examples and free downloadable templates for items such as articles of organization and a membership operating agreement as these documents are found only in LLCs and not any other business entity or structure.
- What Is a Limited Liability Company?
- The Cheapest Way to Form an LLC
- Are There Tax Benefits in an LLC?
- Sample Articles of Organization for an LLC
- The All-Important LLC Operating Agreement
- Additional Must-Have Tips Before You Form an LLC
- Is There Self-Employment Tax in an LLC?
- Tips and Advice on LLC Profit Distributions
- Is There Such a Thing as a Membership Withdrawal Form in an LLC?
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Subchapter “S" Corporations
Subchapter (S) Corporations are the baby of the business structure world and are becoming popular because of their pass-through tax status (much like LLCs). Did you know an S Corporation can be a member in an LLC but not the other way around? Only individuals can be S Corporation members or shareholders.
Retained earnings are also calculated differently in the world of S Corporations and instead of actual retained earnings, what one has is the Triple A Account or the Accumulated Adjustments Account. The IRS also frowns on S Corp owners who don’t take a salary and pay normal 941 taxes, and we’ll offer the reason why and much more in the next library of articles all about S Corporations.
- A Complete Guide to Subchapter S Corporations
- What Is an S-Corporation?
- What Are the Benefits of an S Corporation?
- Should You Take a Salary or Distribution in an S Corp?
- How to Calculate Retained Earnings in an S Corporation
- Why S Corporations May Cause Red Flags With the IRS
- Learning the Advantages of an S Corporation
- Free Tax Worksheet for an S Corporation
- What Are the Meeting Requirements for an S Corporation?
- Can an S Corporation Purchase Real Property?
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What About Other Business Structures: The C Corp and the LLP
Mostly mega corporations in the big business world use C Corporations as they allow for many shares, and it doesn’t matter if the investor or shareholder is an individual, or a member of another type of corporation or business structure.
Again you’ll find a free tax worksheet for a C Corporation and then there is also information on the illusive, but often used Limited Liability Partnership or LLP—is this right for you? Find out below.
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Determining the Differences
You explored the ins and outs of each type of business structure above, but how does one determine the best business structure? This is where looking at similarities and differences and pros and cons come into play.
Is it even a good idea to incorporate at all, especially if you’re a sole proprietorship? What about converting one type of business structure to another and what’s involved? How are different types of entities taxed and finally, we offer a must-read guide on business structures to again help you determine which is right for you.
- How to Choose the Right Business Structure: S Corps, LLCs and Sole Proprietorships
- S Corporations vs. Limited Liability Companies
- C Corporations vs. S Corporations
- Sole Proprietorships vs. Limited Liability Companies
- LLC vs LLP: What’s the Best?
- Can You Convert a C Corporation to a Limited Liability Company?
- What Are the Advantages of a LLC over an S Corp?
- Can a LLC be Taxed as an S Corporation?
- Can You Use an S Corporation to Be a Member in a LLC?
- Tax Savings – C Corps over S Corps
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Extra Tips on Business Entities
We can’t just leave you without some important business entity tools such as how to forget attorney fees and learn to incorporate on your own. You’ll find free downloadable templates for both the articles of incorporation and the bylaws you can use and modify to fit your organizational needs.
Lastly, what about non-profit corporations? We would be missing an important group of tips if we didn’t include our one-stop guide to everything you need know about non-profit corps, how they run and why they are different.
- How to Skip the Legal Fees and Incorporate on Your Own
- Free Template for Articles of Incorporation for C and S Corporations
- Free Template for Bylaws for C and S Corporations
- Must-Have Tips on Partnership Tax Laws
- What is a Registered Agent and Why You Need One
- Should You Even Incorporate Your Business?
- One-Stop Guide to Everything on Non-Profit Corporations
Before you choose any business entity, if you don’t feel confident enough to incorporate on your own, it is important to seek legal help. Also, any time one or more persons is involved as a partner or shareholder in a business structure, it’s best to seek professional help.
Got a question on business structures we haven’t answered here? If so, drop us a comment and we’ll find the answer for you!