Free Viral Marketing Software
|

|
| Step Two-Business Formats | |
If your business is not organized, you will spend valuable time doing nothing....The types of business format that you chose to operate under may be governed by the business opprtunity that you chose. Most home business is operated as a sole proprietor. However, there are advantages to other forms of business. Should you have any questions, you should consider the advice of an accountant or attorney.

Selecting A Business Structure By the IRS (INternal Revenue Service standard, you must as a business, select the form of business entity to establish. This form will determine how you file your taxes. It is the first step in getting started. The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation. A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute. Legal and tax considerations enter into selecting a business structure.
- A sole proprietor is someone who owns an unincorporated business by himself or herself.
-
A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.
-
In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation's capital stock. A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. A corporation can also take special deductions. For federal income tax purposes, a C corporation is recognized as a separate taxpaying entity. A corporation conducts business, realizes net income or loss, pays taxes and distributes profits to shareholders.
The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This creates a double tax. The corporation does not get a tax deduction when it distributes dividends to shareholders. Shareholders cannot deduct any loss of the corporation.
-
An eligible domestic corporation can avoid double taxation (once to the shareholders and again to the corporation) by electing to be treated as an S corporation. Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income. On their tax returns, the S corporation's shareholders include their share of the corporation's separately stated items of income, deduction, loss, and credit, and their share of nonseparately stated income or loss.
-
A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute.
LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.
Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit ???single member??? LLCs, those having only one owner.
A few types of businesses generally cannot be LLCs, such as banks and insurance companies. Check your state???s requirements and the federal tax regulations for further information. There are special rules for foreign LLCs.
Most home business entrepreneurs operate as sole proprietors, but there are advantages to other structures. You may want to consult with an accountant for more information.

|
| |