Dear John Owner,
In response to your request for business structure advice, I believe you will find the following information extremely helpful to lead you to your decision.
First, you must know which your business structure options are, these include: sole proprietorship, partnership and corporation. A partnership could be general or limited and a corporation could be a general or a subchapter S-corporation. Each of these options has their advantages, disadvantages and differences regarding tax consequences. I strongly suggest you choose the one that best fits your productsâ€™ or servicesâ€™ needs.
A sole proprietorship is the best business structure for those starting out with limited ...view middle of the document...
A limited partnership indicates that each partner will have a portion of personal liability proportionate to their capital investment. In this case all limited partners are subject to self-employment tax only on guaranteed payments. It is of extreme importance that if you form a partnership, you and all other partners seek legal counsel to clarify roles and responsibilities.
And finally, you could choose to form a corporation. It is considered a separate legal entity so if you decide to start a general corporation, you should know that all stockholders are safe from any business predators and that your personal assets would be separated from the corporationâ€™s liabilities. With a corporation, the income earned by the business is taxed at the corporate level using corporate tax rates. If a shareholder is also an employee, the employee will pay income tax on his/her wages, and the corporation as well as pay a portion of the social security and Medicare taxes and the corporation can deduct its half. A corporate shareholder (not being an employee) pays income tax for only dividends received, which could then be subject to dividends-received deductions.
If you opt for a Subchapter S. corporation, then you will have a special IRS tax status. This type of business structure is mostly utilized by business owners who prefer to be taxed as sole proprietors or partners....