Business Services

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Business ServicesCorporation


A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity and recognized as such in law for certain purposes.

C- Corporation : C corps are taxed as separate entities. They are also subject to “double taxation” if corporate profits are distributed to owners (shareholders) in the form of dividends. C corporations pay tax on their profits first at the entity level and then owners pay taxes at the individual level on profits received as dividends, resulting in the double tax.

S- Corporation : S corporations are ordinary business corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. The term “S corporation” means a “small business corporation” which has made an election under $1362(a) to be taxed as an S corporation.

Pros
  • Scale Internationally
  • Build a brand
  • Issue shares
Cons
  • Extensive record-keeping
  • Operational processes
  • Reporting

Business ServicesLimited liability company (LLC)

LLCs protect business owners, also referred to as members, from being held personally liable for the actions of the LLC. This limited liability typically protects you from the personal risks involved if a lawsuit were to arise concerning your business — safeguarding your personal assets.

Flexibility in management
  • Corporations have a set management structure where directors oversee the major business decisions and officers are responsible for the day-to-day running of the business. LLCs do not have the same formal management structure.
Pass-through taxation
  • With pass-through taxation, taxes are not paid at the business level. If you choose to become an LLC, income/loss would be reported on your personal tax return. If any taxes were due, they would be paid on the individual level.
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LLC vs. Corporation

We’ve already noted taxation and management as two distinctions between limited liability companies (LLCs) and corporations, but there are other key differences worth highlighting, including:

Business losses: The “S corporation advantage,” allows business owners to use business losses — like those incurred during the startup phase — on their personal tax returns as deductions.

Self-employment taxes: An S corp can provide savings on self-employment or Social Security/Medicare taxes, and it allows owners to offset non-business income with losses from the business — unlike a C corp which is a completely separate tax entity.

Ownership restrictions: Neither the LLC nor the C corporation have restrictions on the number of owners the business can have or who can be an owner. S corporations, however, have a number of restrictions. S corporations can have no more than 100 owners, and owners cannot be “non-resident aliens.” Additionally, S corporations can not be owned by C corporations, LLCs, other S corporations or non-qualified trusts.

Dividends and venture capitalists: C corps are often the preferred incorporation choice of developing businesses. Owners can hold different types of stock interests (including preferred and common stock), which allow for different levels of dividends. This is one reason why venture capitalists choose C corporations when they offer funding to a business. Investors are attracted to the prospect of dividends (often higher dividends) if the corporation makes a profit.

Earnings: C corps can retain and accumulate earnings (within reasonable limits) from year to year.

Business ServicesDoing business as (DBA)

A DBA stands for “doing business as” and it allows a business or sole proprietor to operate under a different business name. Some states may refer to a DBA as a trade name, a fictitious name, or a fictitious business.

Pros
  • Don’t need to create a different company
  • Use current organization branding
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Business ServicesNonprofit

A nonprofit organization is a business that has been granted tax-exempt status by the Internal Revenue Service (IRS) because it furthers a social cause and provides a public benefit.

Pros
  • Give back
  • Add value to the community
  • Tax-exempt status
Cons
  • Special rules for profits earns
  • Corporate profits can’t be distributed
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Business ServicesSole proprietorship

A sole proprietorship is the simplest and most common structure chosen to start a business. It is an unincorporated business owned and run by one individual with no distinction between the business and you, the owner. You are entitled to all profits and are responsible for all your business’s debts, losses and liabilities.

Pros
  • Easy and inexpensive to form
  • Complete control
  • Easy tax preparation
Cons
  • Unlimited personal liability
  • Hard to raise money
  • Heavy burden
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