Business Legal &
Tax Structure Consulting
When starting a business, it is important to implement a proper recordkeeping system from the very beginning. It will save you time and money down the road and could be the difference between success and failure.
Our team of business advisors encourages our clients to think long term and prepare for growth by having systems in place to handle the increase in the number and complexity of transactions. Our clients see the tax and time savings are the initial financial investment.
Types of Business Legal Structures
- A hybrid type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership.
- The ‘owners’ are referred to as ‘members.’ Depending on the state, the members can consist of a single individual (one owner), two or more individuals, corporations, or other LLCs.
- Unlike shareholders in a corporation, in most states LLCs are not taxed as a separate business entity. Instead, all profits and losses are passed through the business to each member of the LLC. LLC members report profits and losses on their personal federal tax returns, just like the owners of a partnership would.
- To form an LLC, you must file the appropriate documents with your state, a process generally done through your Secretary of State’s office.
- The simplest legal structure for any business.
The business is not legally separated from you—the owner. (By default, the legal business name is the same as your legal name).
- Establishing a business name separate from your own is possible by creating a “doing business as” (DBA) name. Most states require DBAs to be registered with the county clerk or Secretary of State.
- The owner can take cash withdrawals from the business at will.
- The owner is required to make quarterly estimated tax payments.
- Establishing a sole proprietorship may be as simple as opening a bank account for the business.
- Some states and municipalities may require obtaining a license or permit.
- Like a sole proprietorship, a general partnership is not a legal entity separate from its owners.
- The difference between a sole proprietorship and partnership is that a sole proprietorship has only one owner and a partnership has two or more owners.
- Owners can take withdrawals and, if specified in the partnership agreement, guaranteed payments.
- Owners pay estimated taxes quarterly.
The partnership can be started through an oral agreement, though a written agreement is advisable (and required in some states).
- Many states have legal provisions for limited liability partnerships (LLPs) that provide some limitations on the liability of the owners and on points such as profit/loss percentages; business decisions; addition and withdrawal of a partner; and terms of operation.
- Some partnership allocation structures may subject you and your business to heightened Internal Revenue Service (IRS) scrutiny.
- To form a partnership, you must register your business with your state, a process generally done through your Secretary of State’s ofﬁce.
- A separate legal entity from its owners.
- Corporate documents are filed with the state and an annual fee is paid.
- Separate corporate bank accounts and records must be created, and assets and money generated by the corporation are owned by the corporation.
- Corporations are required to pay federal, state and, in some cases, local taxes.
- Most businesses must register with the IRS, state, and local revenue agencies. Although any business that has employees will need to get a tax ID number, it is required for a corporation.
- Unlike sole proprietors and partnerships, corporations pay income tax on their profits. In some cases, corporations are taxed twice. First, when the company makes a profit, and again when dividends are paid to shareholders on their personal tax returns.
- Shareholders who also are employees pay income tax on their wages. The corporation and the employee each pay one half of the Social Security and Medicare taxes, but the employer portion is a deductible business expense for the corporation.
- To form a corporation, you must file articles of incorporation with your state, a process generally done through your Secretary of State’s office.
- A corporation with the Subchapter S designation from the IRS.
- To be considered an S corp, you must first charter a business as a corporation in the state where it is headquartered.
- An S corp is different from a C corp in that its profits and losses can pass through to the owner’s personal tax return. Consequently, the business itself is not taxed, only the shareholders are taxed. Losses are limited to the shareholder’s tax basis.
- Shareholders can be paid wages, receive distributions of profits, or a combination of wages and distributions.
Best Business Structure for Taxes: Choosing a Legal Structure for Your Business
The choices can be complicated, and errors can be costly. Business legal structures are regulated by state governments, but your county or municipality may have license requirements as well.
Additionally, current tax laws make it difficult to change your legal structure after you begin operations. Making the right decision before you open for business is critical.
We understand the complexities and value of working with our client’s attorneys or referring attorneys to our clients to prepare documents according to the law. Business owners often focus on tax compliance and overlook the most important documents to their business. It’s important to properly set up operating agreements, shareholder agreements and by-laws. These documents outline how you will set up capital accounts, prepare tax returns, profit share, and dissolve the business if necessary.
Get Started with Business Legal Structuring & Consulting Services Today!
When it comes to business legal and tax structuring evaluation, Fisher, P.A. stands out as the top choice. With a strong reputation in the industry, Fisher, P.A. brings a wealth of experience to the table, navigating the complex landscape of business law and taxation with ease. Our team of business advisors and tax professionals are dedicated to understanding the unique needs of your business, offering tailored solutions that ensure compliance and optimize financial efficiency. What sets Fisher, P.A. apart is not just our vast experience, but also our commitment to fostering long-term client relationships. When you choose Fisher, P.A., you’re gaining a trusted partner invested in the success and growth of your business.