1 / 20

Business Organization Alternatives

Business Organization Alternatives. Organization Alternatives. Sole proprietorship General partnership Limited partnership Corporation Sub S Regular Limited liability company. Examine. Advantages and disadvantages Tax issues Transfer of business interest. Sole Proprietorship.

len
Download Presentation

Business Organization Alternatives

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. BusinessOrganization Alternatives

  2. Organization Alternatives • Sole proprietorship • General partnership • Limited partnership • Corporation • Sub S • Regular • Limited liability company

  3. Examine • Advantages and disadvantages • Tax issues • Transfer of business interest

  4. Sole Proprietorship • Advantages: • Simple • Complete control • Fewer record/reporting requirements

  5. Sole Proprietorship • Disadvantages: • Limited capital • All management & liability • Owners die: business terminates • Estate planning limitations

  6. General Partnership • Advantages: • Easy to form • No income tax is paid by partnership • Income tax benefits flow through to partners

  7. General Partnership • Disadvantages: • Liability for actions of partner • Conflicts between partners • Management control

  8. Suggested Partnership Provisions • Who are the partners • Business name and date formed • Purpose of the business • Duration • Capital contributions and withdrawal provisions • Management, time, vacations, and salary • How are decisions made?

  9. Suggested Partnership Provisions • How are profits and losses shared • Partner rights and obligations • What assets are owned by partnership versus on loan? Who owns what? • Termination provisions • How are disputes resolved?

  10. Limited Partnership • 1 or more general partners • 1 or more limited partners • Limited liability • No management • Estate planning issues for heirs of limited partner(s)

  11. C Corporations • Advantages: • Limited liability • Easily transferable • Death does not terminate

  12. C Corporations • Disadvantages: • Establishment cost • Franchise tax • Formality – Board of Directors • Possible income tax problems -double taxation • Borrowing ability of business

  13. S Corporations • Advantages: • Limited liability • Easily transferable • Death does not terminate • Tax benefits pass to shareholders

  14. S Corporations • Disadvantages: • Establishment cost & franchise tax • Formality: board of directors, etc. • Limited number of permissible shareholders & only 1 stock class • Borrowing ability of business • Only transfer stock to eligible shareholder (another corp or partnership)

  15. Formality • Must have name and certificate of incorporation • Capital must be transferred to corporation • Must elect directors • Must have business meetings and keep minutes • Must create a set of by-laws

  16. Limited Liability Company • Classified as a partnership or corporation • Limits liability • Articles of organization with Secretary of State • Taxation issues • Fringe benefits

  17. Other Tax Issues • Payroll - $150/yr for 1 employee or total to all is >$2,500: must report payroll taxes • Self Employment (SE) Tax 15.3% + 2.9% = 17.2% total up to $106,800 • Hobby loss issue

  18. Hobby Loss • Business like manner of operation • Seek advice • Amount of time spent • Value of the assets growing • Profit motive • Profit and loss history • Other income • Personal pleasure and recreation

  19. Conclusion • Consider what type of entity best fits needs • Consult an attorney and/or tax specialist • Seek information from others who are using various types of business organizations

More Related