Of all the choices you make when starting a business, one of the most important is the type of legal organization you select for your company. This decision can affect how much you pay in taxes, the amount of paperwork your business is required to do, the personal liability you face and your ability to borrow money. Business formation is controlled by the law of the state where your business is organized.This fact sheet provides a quick look at the differences between the most common forms of business entities.The most common forms of businesses are:* Sole Proprietorships* Partnerships* Corporations* Limited Liability Companies (LLC)While state law controls the formation of your business, federal tax law controls how your business is taxed. Federal tax law recognizes an additional business form, the Subchapter S Corporation.All businesses must file an annual return. The form you use depends on how your business is organized. Sole proprietorships and corporations file an income tax return. Partnerships and S Corporations file an information return. For an LLC with at least two members, except for some businesses that are automatically classified as a corporation, it can choose to be classified for tax purposes as either a corporation or a partnership. A business with a single member can choose to be classified as either a corporation or disregarded as an entity separate from its owner, that is, a “disregarded entity.” As a disregarded entity the LLC will not file a separate return instead all the income or loss is reported by the single member/owner on its annual return.The answer to the question “What structure makes the most sense?” depends on the individual circumstances of each business owner.The type of business entity you choose will depend on:* Liability* Taxation* RecordkeepingClick here to continue reading article.Contact me for further advice on choosing a business structure..Be blessed and feel free to send your tax, financial, opportunity and travel itinerary questions to khardge@gmail.com. Request a free eBrochure to your dream destination.--Ktasha N. Hardge is a Tax Professional and Home Based Business Expert who is pursuing the role of Lifestyle Enhancement Specialist. She is on a journey of financial freedom and time freedom and wants to help others do the same. Visit Hardge Connections, LLC for interactive financial tools and resources that can help you grow personally and professionally. Visit Global Connections Travel to learn about an amazing opportunity that can transform your life as well as finding some of the best travel deals online.
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