CHOOSING THE RIGHT ENTITY FOR YOUR BUSINESS John Provo Certified - PowerPoint PPT Presentation

| St. Paul Overview CHOOSING THE RIGHT ENTITY FOR YOUR BUSINESS John Provo Certified Mentor Maplewood Public Library September 12, 2018

SCORE WHY IT MA TTERS The entity you choose will affect: ❑ Start Up Costs ❑ Control over key decisions ❑ Access to outside capital ❑ Personal Liability ❑ T axes

SCORE FORMS A BUSINESS CAN TAKE Sole Proprietorship ❑ Partnerships (General, Limited, LLP , LLLP) ❑ Corporations (S Corp/ C Corp) ❑ Limited Liability Company (LLC) ❑

SCORE F ACTORSTO C ONSIDER  Start-Up Costs  Need for Capital Personal Liability  Key Decisions   T ax Consequences  Ease of Management

SCORE S OLE P ROPRIETORSHIP Easiest to set up and operate ❑ Profits are taxed only once ❑ Unlimited personal liability ❑ Business ends on owner’s death ❑ Easy to liquidate ❑

SCORE S OLE P ROPRIETORSHIP F ORMATION ❑ No formal process ❑ Obtain licenses and permits ❑ Register Assumed Name (if necessary) ❑ Obtain Employer Identification Number

SCORE P ARTNERSHIPS ❑ T wo or more people contribute money, labor and/or skill to a business, and share profits, losses, and management. ❑ T wo Types: General and Limited

SCORE G ENERAL P ARTNERSHIP ❑ Easy to set up and operate ❑ Profits are taxed only once Unlimited personal liability ❑ Business ends on partner’s death or withdrawal ❑ (unless otherwise agreed) Easy to liquidate ❑

SCORE G ENERAL P ARTNERSHIP F ORMATION ❑ No formal process ❑ Register Assumed Name (if necessary) ❑ Partnership Agreement (optional, but highly recommended). ❑ Obtain licenses and permits ❑ Obtain Employer Identification Number

SCORE L IMITED P ARTNERSHIP Easy to set up and operate ❑ Profits are taxed only once ❑ Limited personal liability for limited partners ❑ Business ends on partner’s death or withdrawal ❑ (unless otherwise agreed) Easy to liquidate ❑

SCORE L IMITED P ARTNERSHIP F ORMATION ❑ File Certificate of Limited Partnership . ❑ Name must include “ Limited Partnership ❑ Partnership Agreement (required) law. ❑ Obtain licenses and permits ❑ Obtain Employer Identification Number ❑ Obtain Employer Identification Number ❑ la.w ❑ Maintain records as required by state law.

SCORE C ORPORATIONS Formed under state or federal law. ❑ Legally treated as an artificial person, ❑ distinct from its shareholder owner. . 2 Types: C Corp. and S Corp ❑

SCORE C ORPORATIONS ❑ Complex to set up and operate ❑ Profits may be subject to double taxation ❑ Limited legal liability ❑ Business continues after death of owner(s) ❑ More difficult to liquidate

SCORE C ORPORATION F ORMATION ❑ File Articles of Incorporation ❑ Name must include “Corporation” or ❑ law. similar designation ❑ Shareholders own corporation and elect Board of Directors ❑ Board sets policy and elects officers to run the business

SCORE L IMITED L IABILITY C OMPANY Cross between a partnership and a ❑ corporation Tax advantages of a partnership ❑ Limited liability of a corporation ❑

SCORE LLC F ORMATION ❑ File Articles of Incorporation ❑ Name must include “LLC” (or similar designation) law. ❑ Members own entity and elect officers to run the business ❑ Obtain Employer Identification Number

SCORE S TART U P C OSTS LEAST MORE EXPENSIVE EXPENSIVE P-Ship C LLC Corp Sole S Corp Prop.

SCORE KEY DECISIONS LEAST MOST CONTROL CONTROL P-Ship S LLC Corp Sole C Corp Prop.

SCORE E ASE OF M ANAGEMENT MORE EASIEST DIFFICULT LLC S P- Corp Ship . Sole C Corp Prop.

SCORE P ERSONAL L IABILITY LEAST MORE RISK RISK S Corp. P- LLC Ship Sole C Corp Prop.

SCORE N EED FOR O UTSIDE C APITAL LEAST MORE ACCESS ACCESS LLC S P-Ship CORP Sole C Corp Prop.

| St. Paul Overview 20% S MALL B USINESS D EDUCTION TYPE OF TAXPAYER INCOMETHRESHHOLD Single Persons $157,500 Married Persons $315,000 Estates $157,500 Non-grantor Trusts $157,500 Children subject to “kiddie tax” $157,500

| St. Paul Overview 20% S MALL B USINESS T AX D EDUCTION Type of Business Taxable Income Savings Service Non-Service Less Than Up to $315,000 20% Deduction 20% Deduction $63,000 $315,000 - Deduction phased Limitation Up to $415,000 out phased-in $20,000 Greater than No Deduction W-2/ Property - 0 - $415,000 limit Applies

| St. Paul Overview ENTITIES ELIGIBLE FOR 20% SMALL BUSINESS DEDUCTION ❑ Sole Proprietors ❑ Rental real estate owners ❑ S Corporations ❑ Partnerships

| St. Paul Overview P ERSONAL S ERVICES

| St. Paul Overview P ERSONAL S ERVICES

| St. Paul Overview A PARTMENT B UILDING

| St. Paul Overview A PARTMENT B UILDING

| St. Paul Overview C ONSUMER P RODUCTS

| St. Paul Overview C ONSUMER P RODUCTS

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