Ok, I have had 2 or 3 people mention something about business types in the last new entrees I have made. I know that most people dont know much about how they work and what the benefits are, so im going to do some explaining…
There are a few types of entity’s:
Sole Proprietorship
Partnership
Limited Liability Company (LLC)
Corp.
Subchap. S. Corp.
A Sole proprietorship is simple a owner of a business that is responsible for all the losses of the business. You simply start up a sole proprietorship by simply starting a business. You get a individual bank account that you would use for the business, and the businesses is ran under the owners name. Most of the time, the only paperwork you would have to do are business licences, zoning permits, etc.
A Sole Proprietorship is the cheapest to form. However, taxes are deadly for a sole proprietor! The owner pays all taxes ans even self employment taxes.
A Corporation and a Sub Chatper S Corp. completely separate the owners, which are called shareholders, from the company. A Corporation is like its own legal person. The shareholders only loose what they put into the company if the company fails. A Corp. get taxed based on two ways. All the shareholders are paid in salary or wadges, they get W-2 taxed which is how a normal person working at walmart gets taxed. Then the company gets taxed on its profits.
A LLC is treated much like a partnership and a sole proprietorship. The only difference is that the member or members COULD BE subject to personal liability. Its doesnt protect you 100%, but its a good start. The only tax benefit is the option of the LLC being treated like a S Corp. or a Corp. However, you do still have to self-employment tax. Which is a pain.
So the reason why I have my main company a INC is for tax reasons. And I am making my real estate assets a LLC is for the protection of that entity….
If you enjoyed this blog post than I think you should subscribe to the RSS feed. That way you can learn a lot more from me and laugh some more at my really bad grammar. Again, here is the link for the RSS feed.
Random Posts
Comments are Dofollow! My thanks to you for contributing to the discussion
5 Comments
Sorry, the comment form is closed at this time.
I’ve been thinking about forming an LLC or INC to handle all my websites and online earnings.
What do you recommend based on the info you provided?
Well, unless you make over 100k a year, the the inc wont help you much.
I would talk to a accountant if I where you, a real one, not a H&R block place
But I say a LLC, its only 100$ to do it yourself
Would you recommend forming an LLC even if we’re making
Well I would talk with an accountant.
I would at least get a LLC to help protect yourseft and your assets.
You can get a INC if you wanted to, to help reduce your taxes. Its up to you…
I personally prefer LLC