The my profits with anyone either. I

The are several different business
structures, all of which have different legal and tax implications. If I was starting
my own business, sole proprietorship would be my choice. The sole
proprietorship is the most basic type of business to establish. All the legal
liabilities and everything that comes with owning a business would fall on me
and me only. That comes with being a sole owner and not sharing with anyone.
That also means I don’t have to share my profits with anyone either. I don’t
currently own a business so I am coming from a timid place and my heart says go
small. There are other business structures such as limited liability company,
partnership and corporation. Let’s dig a little deeper.

To form a sole proprietorship, it
doesn’t take any formal action. As the single owner and the only person associated
with the business, you have sole proprietorship based off your business
practices. All that needs to be done is to get the necessary business licenses
and permits in order to operate legally under the regulations of your state and
industry. Finally, you will have to file a fictitious name to operate under if
you do not want your business under your name. Ensure it is original so you can
trademark it. Some advantages to this type of business is that it is easy to
form, you have complete control and the simplified tax preparation. As the most
common structure chosen, sole proprietorship is easy and inexpensive to form.
The money involved in the initial start-up is likely the primary reason it is
the most common. Another advantage is complete control. This means that as the
sole owner, you have complete control over all decision regarding your
business. The last advantage is simplified tax preparation. The business is not
taxed separately, so it is easy to fulfill tax reporting requirements. Some
disadvantages are unlimited personal liability, hard to raise money and heavy
burden. With unlimited personal liability, you are responsible for anybody
acting on behalf of your business also such as employees. It is hard to raise
money because investors won’t invest and banks are hesitant to lend because of
a lack of credibility regarding repayment. Heavy burden deals with how much
pressure comes with being ultimately responsible for the success and failure of
a business. The pressure alone is enough to keep people from going for it

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A limited liability company (LLC)
is a hybrid type of legal structure that provides the limited
liability features of a corporation and the tax efficiency and operational flexibility
of a partnership. There can be one owner or two or more owners are called
members in a LLC. There can also be other corporations or LLC’s apart of the
members. The steps to forming a LLC are the choose a business name, file the articles
of organization and create an operating agreement. The business name must be
different than a LLC in the same state and must indicate that it’s an LLC. You
also must obtain the correct licenses and permits according to your local rules
and regulations so you can operate legally. Also, unlike a sole proprietorship
you must announce your business. You must check your state guidelines because
some states require you to publish a statement in the local paper with your LLC
information. an LLC is not a separate tax entity, so the business itself is not
taxed. Instead, all federal income taxes are passed on to the LLC’s members and
are paid through their personal income tax. Some advantages are limited
liability, less recordkeeping and sharing profits. Members of the LLC are not
held personally responsible liable for any business issues, which means if the
business were to hit any legal problems, the members would not have their
personal assets touched. Sharing of profits deals with fewer restrictions on
how the profit is split amongst the members of the LLC. Some disadvantages of an
LLC include limited life and self-employment taxes. If a partner decides to
leave the LLC any remaining obligations is left to the remaining members, so it
is important to outline these details in the initial agreement. Members of the
LLC are considered self-employed and must pay the appropriate taxes.

A partnership is a single business
where two or more people share ownership. They share everything from losses to
gains. The steps to form a partnership are as follows you have to register your
business with your state, you and your partner have to submit an agreed upon name
for your business, and finally you must get licenses and permits relevant to
the rules and regulations in your state. Most partnerships will have to
register with the IRS and get a tax ID number or permit. They must do an annual
information return and do their taxes as one. Some advantages are it is easy
and inexpensive, shared financial commitment, complementary skills and
partnership incentives for employees. It is cheap, partners are equally
invested so there is an opportunity to pool resources and double seed money.
Partners bring different resources and experiences and could lead to a more
well rounder team. Some disadvantages are joint and individual liability,
disagreements among partners and shared profits. Partners are not only liable
for themselves in the business but also their partners. If there is a problem
with a partner it must be resolved in house because it will turn the whole
thing awkward and put a hindrance on getting quality work done. Shared profits
of the company can also be a disadvantage to partnerships because one of them
at one point or another may feel as if they are putting in more work although
they share profits equally.

A corporation is an independent
legal entity owned by shareholders and is the most complex of the group
discussed. A corporation is formed by picking out a business name, then you
must register your name with the state government. You must also register your
business as a corporation, and finally you must get proper licenses and permits
to be able to operate legally in your state under their rules and regulations. Liability
falls onto the corporation the shareholders are just the money behind the
business. Corporations must pay federal, state and at time local taxes. The
corporation pays income tax on their profits and may even be taxed twice, one
for the company profit and when dividends are paid to shareholder on their
personal tax returns.  Some advantages of
a corporation are limited liability, ability to generate capital, corporate tax
treatment.  Shareholders’ personal assets
are protected but can be held accountable for their investment. The
corporations can raise revenue by selling stock. They can also be very
attractive to employees. Some disadvantages to corporations are that they take
a time and money, double taxing which is the fact that the corporation gets taxed
twice once on the profit and again when dividends are paid to shareholders, and
paperwork is a must because they are so highly regulated.