|
During the nearly 30 years that we
have worked with the Central Florida
business community, it has been proven
time and again that those new businesses
which provide a sound foundation for
their business to grow, have a better
chance of succeeding. In addition
to the obvious decisions as to which
products and services to offer and
how to best market them are the equally
important decisions as to which type
of entity to form, which internal
record keeping methods to use and
how to best employ income tax planning.
There
are many different types of business
entities. Each is unique and has its
own benefits and drawbacks.
Proprietorships
Benefits:
- Easy to form.
- Inexpensive to start and operate.
Drawbacks:
-
Full legal liability.
- Pays
self employment taxes on the business
net income in addition to income
taxes.
Partnerships
Benefits:
-
Sharing of responsibilities.
- Partners
pay income taxes on the profits
of the partnership on their personal
income tax returns.
Drawbacks:
-
Full legal liability for own and
other general partners' actions.
- Pays
self employment taxes on the business
net income in addition to income
taxes.
Limited
Liability Companies
Benefits:
-
Personal liability limited to investment
in most instances.
- Election
can be made for income to be taxed
as a Partnership, Corporation or
Proprietorship.
- Only
entity which may have foreign interests
and allow pass through of income—and
taxes—to members.
- Best
income tax planning alternative
of all entities.
Drawbacks:
-
More expensive to form and operate
than a proprietorship or partnership.
Corporations
Benefits:
-
Personal liability limited to investment
in most instances.
- Corporation
may elect to be taxed as a pass
through entity paying no income
taxes to either the state or federal
governments.
Drawbacks:
-
If election is not made to be taxed
as a pass through entity, the corporation
pays both state and federal income
taxes. Shareholders are taxed again
on the profits when distributed.
- More
expensive to form and operate than
a proprietorship.
We
recommend that business owners seek
professional guidance to ensure creating
an entity that best compliments their
business.
As a general rule, there are many
reasons why businesses—even one
man shops—should incorporate
or form an LLC. Among the better reasons
are: limited legal liability, longevity,
and income tax savings. In the State
of Florida, it only takes only one
person to form and operate a corporation,
or an LLC. In addition, most small
businesses should elect to be taxed
as an S Corporation. The S Corporation
pays neither state nor federal income
taxes..
We
can help business owners decide which
entity is best, based upon the business
scope and plan. Further, we can help
file all the necessary paperwork to
establish and operate the entity.
(407) 897-2277 or E
Mail us today.
|
