Small Business and Startup Services

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Sole Proprietorship

Choosing a sole proprietorship is the easiest option for your start-up business. With it you have complete control. In fact, just by conducting business activities, you are considered a sole proprietorship, even if you have no other business registration completed.

Sole proprietorships and the business owner are linked when it comes to taxation. There is no separate business entity. Assets and liabilities of the business are combined with personal assets and liabilities. If debts or obligations arise from the business, you can be held liable.

A sole proprietorship can get a trade name. However, it cannot sell stock to raise money. Banks are often resistant to lending to sole proprietorships.

If your business model is low-risk or an idea is being tested on a small scale, this may be a good choice.

Partnership

When two or more people want to go into business together, the simplest approach is to opt for a partnership structure. The two most common options are limited partnerships and limited liability partnerships.

In a limited partnership, one general partner has unlimited liability and the others have limited liability. In exchange the partner with unlimited liability typically has more control over the company. Profits are declared on individual tax returns. The partner with unlimited liability will need to pay self-employment taxes. A partnership agreement documents the details.

Limited liability partnerships are much the same except all partners have limited liability. They are not responsible for debts the partnership incurs and are not responsible for any action another partner takes.

Professional groups and multiple owners would do well choosing a partnership.

Limited Liability Company (LLC)

An LLC gives you the personal liability protection similar to corporations or partnerships. That means your personal assets are not in jeopardy if the business is a part of lawsuits or bankruptcy.

Profits and losses do not incur corporate taxes. LLC members are considered self-employed and need to pay self-employment taxes. These structures need special agreements on how to handle buying, selling and transferring ownership, or there may be a limited life in certain states for them, triggered by a member leaving or joining.

LLCs work well for medium to high risk businesses or for owners who want to protect personal assets or pay lower taxes than corporations.

Corporations

• C Corp

  A C Corp is a structure that establishes a completely independent tax entity for the business. There is a heavy amount of paperwork and reporting for a corporation. However, it also provides the best protection for it’s owners.

  Corporations pay their own income tax and in some cases are double taxed in the form of income tax on profits and on dividends paid to shareholders when they are listed on personal income taxes.

  Owners can sell their shares so corporations can be completely independent. Stock sales also allow a corporation to generate capital.

  This is a good choice for businesses that may be sold in the future, go public, or ones that need to raise money.

• S Corp

  The S Corp is like the C Corp but it has it’s own built-in protection against the double taxation. Profits and losses can be passed through owners’ personal income taxes without having to pay corporate taxes.

  S Corps must be registered with the IRS. There are limits on the number of shareholders. Shareholders must have U.S. citizenship.

  Not all states recognize the S Corp.

  This is a good choice for those trying to minimize taxation.

• Nonprofit Corp

  Nonprofit Corporations have very specific purposes: education, religious work, charity, scientific, or literary work. These organizations are tax-exempt because they provide a benefit to the public.

  In order to not pay state or federal income taxes on profits, the organization must file with the IRS. Organizational rules mirror those of C Corps. There are specific guidelines about the use of profits.

  Often known as 501 (c)(3), this structure is ideal for corporations with an altruistic purpose.