When you are building a business, you can take so many different options. The options are seemingly endless, from location and name to legal entity type. The business structures you can choose from are:
This entity is for people who own an unincorporated business by themselves.
A partnership is when two or more people decide to do trade or business with one another. Each person involved contributes money, property, labor, or skill and shares in the profits and losses of the company formed.
When forming a corporation, prospective shareholders exchange money, property, or both in return for the corporation’s capital stock. This corporation usually takes the same tax deductions as a sole proprietorship to find its taxable income. Although, it can also take special deductions. Corporations are double-taxed. The profit they earn is taxed to the corporation when it is earned, and then it is taxed to the shareholders when it is distributed as dividends.
For federal tax purposes, these corporations choose to pass corporate income, losses, deductions, and credits through their shareholders. These shareholders report the income and losses on their tax returns. These tax returns are assessed at their individual income tax rates. This strategy allows S corporations to avoid the double taxation of corporate income.
The owners of an LLC are called members. Depending on the state’s rules, they may include individuals, corporations, other LLCs, and foreign entities. An LLC is allowed by state statute. Each state uses different regulations to form an LLC. If you are interested in developing an LLC, check with your state and speak with an experienced attorney.
Not sure which business entity is correct for you? That is why we are here to help. Contact our driven team at The Kaplan Law Firm at 248-920-9829. We will help you every step of the way on your business journey.