Starting a Business - (2 - 3)
When we last met, I went over some of need for licenses and permits, as well as how to locate which one are right for you.
You may already have a plan and form of your business entity set and if you do great, if not, I'd like to share a few things with you.
Form of Entity?
All offer advantageous to you when you start a business, however there are disadvantageous too.
- Sole proprietorships are most simple for a business owner.
A sole proprietor does not have to file a separate business tax return.
A Schedule C is attached to your 1040 and filed with IRS.
Gains and losses from business are simply combined with other personal taxable items,
Disadvantages include having personal liability and lack of investment flexibility.
If you need cash you need to personally have it in bank, or you can borrow it from bank.
- Partnerships are similar to sole proprietorships, in that formation is generally easy, however, you would be wise to use an attorney.
Also taxes are simply passed through to individuals personal tax returns.
The disadvantages are same as being a sole proprietor, personal liability and lack of investment flexibility.
- Limited Liability Corporations (LLC’s) do much better in limiting your liability, as name implies.
Disadvantages include costs of setting up.
Federal limits on who and what are able to be LLC’s and tax implications both federal and state.
- Corporations offer most personal and asset protection and have greatest flexibility of any business entity.
Corporations vary in their structure and organization.
A corporation is not just a corporation.