Jolt! For the Week of August 11, 2008 - Business Structure - Blogs

I have decided the type of business I want to establish and I have selected my business name. I was told I need to select a business structure, but have no idea where to start. Can you help?-- Tamera, Washington, DCThank you so much for your email. This is an area in which many individuals seek guidance and assistance. When selecting your business structure, you want to weigh the pros and cons of each structure. There are 5 business structures that we will address.Sole ProprietorCorporationPartnershipS-CorporationNon-profitSole ProprietorWhen an individual establishes a sole proprietorship, the individual/owner is typically seen as a contractor or consultant. This is the easiest type of business to establish. As a sole proprietor, you will report your business income and expenses on IRS Form 1040 Schedule C. This type of business is not seen as a separate entity from the owner; therefore, the legal and financial protection is limited for a sole proprietor.CorporationA corporation is an incorporated entity. A corporation does provide a measure of legal and financial protection for the shareholders. Corporations have full discretion over how the profits are distributed or retained. Corporations can have an unlimited number of years with losses. All corporations must have a minimum of one shareholder. You can incorporate a business yourself or hire an incorporation firm or an attorney. You will also need to register your business name. While the fees for this service typically begin at $300, there are also other state fees associated with filing the incorporation. When filing your taxes, you will utilize IRS tax form 1120.PartnershipA partnership is an incorporated entity. To establish a partnership you must have one at least one General Partner who will assume unlimited liability for the business. There must be a minimum of two shareholders for a partnership. All profits and losses are distributed to shareholders. When filing your taxes, you will utilize IRS tax form 1065.S-CorporationAn S-Corporation is similar to a partnership – S-Corporation must have one shareholder, but no more than 100 shareholders. In the event a shareholder provides professional services to the business, the shareholder must be compensated at a reasonable rate separate from the distribution of profits and losses. When filing your taxes, you will utilize IRS tax form 1120S.Non-profit organizationNon-profit entities are corporations established for civic or charitable purposes. Typically, they are exempt from state and federal taxation on its income. Non-profit entities have a great responsibility to report its financial activities to ensure compliance with state and federal laws. When filing your taxes, you will utilize IRS tax form 990.For assistance or more information, please email coach@aliveincorporated.com.Alive Inc. Coachseed. plant. grow.coach@aliveincorporated.comwww.aliveincorporated.comALIVE Magazinewww.alivemagonline.comCopyright © 2008 Alive Incorporated

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