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Selecting the Right Structure For Your Business

Learn how to operate and structure your business effectively by consulting with a CPA. Get advice on filing and compliance issues, tax benefits and detriments, ownership and continuity changes, legal liability protection, and more.

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Selecting the Right Structure For Your Business

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  1. Selecting the Right Structure For Your Business Advice from CPAs

  2. 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 Getting Started

  3. Tax and non-tax issues, including: Ownership and continuity changes Legal liability protection Federal and state income taxes Social Security taxes And more Factors to Consider

  4. Sole Proprietorship Partnership – General and Limited Corporation – S or C Limited Liability Company Structuring for Success

  5. One-person business Not registered with state as a limited liability company or corporation Some states require license or permit Sole Proprietorship

  6. Owner is personally liable Simplest for tax purposes Business ceases to exist with death of owner Sole Proprietorship

  7. A relationship between two or more persons Not classified as a corporation Draft agreement to address potential concerns Hire an attorney to write up partnership agreement Partnership

  8. Two types: General and Limited General Responsible for partnership liabilities, no matter which partner incurred them Limited Only liable to the extent of partnership investment Partnership

  9. Buy-Sell Agreements cover: Who can buy a departing partner’s share? The events that will trigger a buyout What determines the price for a partner’s interest Partnership

  10. Considered separate from owners and managers – independently liable and legal Owner’s personal assets are protected No limit on number of shareholders in C Corporation Corporation

  11. 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 law Corporation

  12. 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 members Limited Liability Company

  13. 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 member’s income tax return Limited Liability Company

  14. Partnerships, S and Personal Service Corporations: Must conform taxes to that of their owners May use tax year rather than calendar year on Form 8717 Avoid a year-end that is the busiest time for your company Tax Considerations

  15. 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 C Corporation Two levels of taxation Tax Considerations

  16. Key issue facing small businesses: Wage income v. Self-employment income Make the distinction Sole proprietors may prefer to pay themselves in the form of wages Compensation and Payroll Taxes

  17. Thank you and good luck with your future financial endeavors.

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