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Starting a business is one of the greatest opportunities we can have. However, along with that opportunity, also comes many responsibilities. Depending on how you form your business, you have options and tax advantages to best suit your business needs. Bridgewater Law Group can advise you on the formation process and prepare the documents to file.
A C-Corporation is the most popular type of corporation. This is a business formation where the business profits are taxed separately from the owners. One of the advantages of C-Corporation, is if the business incurs financial trouble, the owners are not required to use personal finances to offset the loss. The C-Corporation is permitted an unlimited number of shareholders and can set the qualifications of who can become a shareholder for rights of ownership. One of the disadvantages of C-Corporation is that taxes on this type of business carries more complexities than other business formations.
S-Corporation is another type of business and is usually referenced as an "S-Corp." The main difference for an S-Corp is how they file with the IRS; they request to become a special type of corporation. Most businesses who opt for S-Corp do so in order to avoid being taxed twice. Therefore, S-Corporations do not pay an income tax, rather, the income passes through to the shareholders, whom then have to pay the taxes on their personal returns. The tax structure is similar to that of a partnership, but this type of entity still provides most of the legal protections afforded to C-Corps.
A partnership is when two or more individuals own a business, and there are a couple different types of partnerships.
Partners work together to run the business. In this type of structure, all of the partners are involved in the daily activities and management of the company, and each is individually liable for the debts of the company.
In a limited partnership, the partners are viewed more like investors and removed from business operations. The business earnings and losses are to be reported to investors and are expected to yield a return on their business. Limited partnerships also have options to avoid double taxations. Investors in a limited partnership will also have obligations if the company goes south, and partners can be held liable for losses. General partners run the daily operations and are responsible for management, and as opposed to the limited partners who are typically only liable for their financial investment, these partners are personally liable for all of the debts of the partnership.
A limited liability company is often referred to as an LLC. Many business owners find this favorable, as it offers many of the benefits of a partnership and corporation, all in one formation. An LLC carries a legal distinction for the owners, offering limited liability similar to a corporation, but has fewer complications for taxes and management, as it would for a partnership. Players in an LLC Corporation are often considered “members.” Members of the LLC report all profits and losses on their personal tax forms.
For a Sole Proprietorship, the business owner is solely responsible for operating the business and is personally liable for the business profits and losses.
An expert attorney can help you with understanding and navigating the many complexities in a business formation.
Our highly qualified attorneys offer many legal services. If we take on your case, it is because we believe in it and will not stop fighting for you. Running a business is stressful enough, let us help you.
We can offer you a free consultation and tell you our assessment, to advise you on the best options for your business. Our consultants are standing by 24 hours a day, seven days a week, to advise you on the potential of our case. Your business needs cannot afford to wait, so give us a call today.
