Business Structure
Once you’ve decided to start a business, choosing the right business structure is probably the most important decision you’ll make.
The structure of your business is directly related to your tax liability and has substantial legal implications. As a result, the structure of your business has a direct impact on future growth potential and profits. Because of this, it’s imperative to select the right business entity for today’s needs and tomorrow’s growth. Fortunately, you don’t have to do it alone! The accounting and tax planning professionals at RS CPAs can help. We’ll work closely with you to understand your business and goals to guide you to the best decision in our business structure services.
Sole Proprietorship
A sole proprietor is a business owner who owns and operates an unincorporated business by themselves. A few key facts and notes about sole proprietorships include: They are easy to operate and form The owner will remain liable for any lawsuits filed against the business The owner reports all losses and profits on their personal income taxes
Partnership Types Of Business Entities
Partnership types of businesses share a lot in common with sole proprietorships. However, the key difference is partnerships will have two or more business owners. There are two different types of partnerships: general and limited partnerships.
General partnerships (GPs) are the standard type of this business entity and the default mode of ownership for more than one owner. With GPs, you’re not required to register the partnership with your respective state.
Limited partnerships (LP)s on the other hand are registered with the state. In an LP, you can have two different types of partners:
- General partners are responsible for operating, owning, and assuming liability for the business.
Limited partners or silent partners are those who typically act as investors without having a hand in the day-to-day running of the business.
Corporation or C-Corp Type Of Business Filing
Partnership Types Of Business Entities
Partnership types of businesses share a lot in common with sole proprietorships. However, the key difference is partnerships will have two or more business owners. There are two different types of partnerships: general and limited partnerships.
S-Corporation Type Of Business Structure
Unique because it offers the legal protections of a C-Corp with pass-through taxation benefits. Pass-through taxation means it functions similarly to a partnership or sole proprietorship where the losses and profits of an S-Corp are passed through to the owner’s individual tax returns. As a result, there are no corporate-level taxes for an S-Corp.
- Independent tax and legal structures separate from owners
- Owners report their share of loss and profit on their own tax returns
- Helps separate business owners’ assets from business debts
- S-Corps have a limit on the number of shareholders
- All shareholders are required to be U.S. residents or citizens
- Must hold annual meetings and the minutes must be recorded
Limited Liability Company Company Business Filing
Offering the best of both worlds, a limited liability company (LLC) borrows key attractive features from each entity. Similar to sole proprietorships and partnerships, LLCs have fewer requirements and reduced paperwork. On the other hand, LLCs boast liability protections similar to those of a corporation. And when it comes to taxation, LLCs allow you to elect how you would prefer the IRS categorize your business — as a corporation or a pass-through entity. A few key benefits and facts of S-Corps include:
- LLCs are independent legal entities separate from the owners
- LLCs can help separate business debts from your personal assets
- There are no limits to the number of owners
- Can be taxed like a partnership if there are multiple owners or like a sole proprietorship if there is only one owner
- This entity isn’t required to have annual meetings or minutes
- The business is governed by operating agreements
