Business Entity Selection in Palm Beach Florida
Sometimes it can be difficult to select what business entity you should select for your business. We are here to help. There are many things to consider before just selecting a business entity. Making the wrong decision can lead to many tax burdens or complications. We are here to walk you through the steps of choosing which business entity is right for you, and then also help you when it comes the time when it would be wise to move to another business entity for tax purposes. There are also times where we will recommend an attorney help with drafting the right document based on the entity planning chosen.
The Different Business Entities
Limited Liability Companies
These are also known as LLC’s. This is a legal structure that is independent from the owner or owners. This is definitely helpful when you are separating your business debts from your personal assets. LLC’s are taxed like Sole Proprietorship, if you only have one owner. If you have multiple owners, an LLC will be taxed as a Partnership by default. One of the advantages to an LLC is that there is no limit to the number of owners. Another advantage to Limited Liability Companies is you are not required to record minutes or hold annual meetings, however, they are governed by operating agreements. If you are interested in opening an LLC, please contact us for more information.
C-Corps are are independently taxed from their owners. This also helps you separate your business debts from your personal assets. There are shareholders in C-Corporations, however there is no limit to the number of shareholders a C-Corporation can have. C-Corps are taxed on shareholder dividends and corporate profits. That is something to take into consideration. Another thing to take into consideration is that C-Corporations are required to record meeting minutes and hold annual meetings. When President Trump passed the new tax laws in 2017, C- Corp became a popular entity choice once again due to the lower tax rate imposed. Please contact us if you would like to know more about C-Corporations.
S-Corps is also a tax structure that is independent from the owner or owners. S-Corps also help separate business debts from personal assets. Keep in mind, owners of S-Corporations must report their share of profits and losses on their personal taxes,known as passive income. This is something that takes someone that knows what they are doing. One way S-Corps are different is how they limit the number of shareholders. Shareholders also must be US residents or citizens. This is another entity that has to hold meetings and record the minutes. A new deduction created by the newest tax law is the 199A deduction. Make sure your tax professional is maximizing your tax deductions. If you think an S-Corp is the right situation for you, please contact us to discuss if this is the right option for your business.
The main thing to consider when you choose a Partnership is that the partners are responsible for any lawsuits filed against the business. An advantage of a Partnership is that no state filing is mandatory to form a partnership. Another advantage is they are easy to form and operate. However, something to keep in mind is that owners report their profit and loss in the company on their personal tax returns. The earning may be subject to Self-Employment Tax. There are strict rules governing distributions and basis as it relates to partnerships. Contact us to learn more on wheat entity structure best fits your current situation or future goals.
Sole Proprietorships also remain responsible for any lawsuits against the business. They are similar to a partnership because no state filing is required to form a Sole Proprietorships. They are also similar to a Partnership because they are easy to form and operate.
The owner reports the business profit and loss on their personal tax return. Do you think a Sole Proprietorship is right for your business? Please contact us with your questions and concerns.
If you are interested in learning more about starting your own business and need help figuring out your business entity, please feel free to contact us.