New Business Formation

Are you looking to start your new business? The Office is the perfect place for you. Which type of business organization should you choose? Let us explain the different ways that you can choose to run a business.

It is very important the way you run your business and how you set up the business from the inception date. You can run a business as a Sole Proprietor, a Partnership or a Corporation. It will be easier for everyone if you start a business in the right format from the day one.

What exactly is an LLC?

Many times, you hear about running a business as a Limited Liability Company or LLC. An LLC is an entity formed under the state law. When we’re talking about taxes, a limited liability company, LLC, can choose to be treated as a Sole Proprietor, a S Corporation, or a Partnership. It all depends on the number of owners/members.

What is a Sole Proprietorship?

One individual carrying on an unincorporated trade or business. Sole proprietorship is the easiest business to organize with minimal legal restrictions. The owner, the sole proprietor, has complete freedom over business decisions and is entitled to 100% of the profits. The owner is limited by his or her own ability to raise capital and obtain financing. Outside investors cannot be part owners.

What is a Partnership?

An unincorporated organization with two or more members is a partnership by default for federal tax purposes if its members carry on a trade, business, or financial operation and divide profits. An LLC with at least two members is classified as a partnership for federal tax purposes unless the entity files Form 8832, Entity Classification Election, to elect to be taxed as a corporation.

What is Corporation?

A corporation is a legal entity, a legal association carrying on a trade or business organized under the state law. Often referred to as an “artificial person”, a corporation can enter into contracts, sue or be sued, incur debt, own property, and earn income. The issues involving formation and liability protection of corporations are determined under the state law. Issues involving issuance of stock and taxation are determined under the federal law.

What is a S Corporation?

A corporation that elected that for tax purposes to be treated as an S corporation. To become an S Corporation, you have to meet certain criteria. The S Corporation status is given and approved at the Internal Revenue Service level, not at the State level. Shareholders are limited to individuals, estates, certain trusts, and certain charities. An S Corporation generally pays no tax, and it’s a so-called pass-through entity. The taxes are calculated at the shareholder level.

Advantages and disadvantages on each type of business can be explained more in detail. If you are not sure which type is more beneficial for your new business, just contact The Office at (817) 901-2323 to schedule your free consultation. Whether you prefer to meet in-person, over the phone, or online, we are here to assist you. We have the best professional team ready to provide these services for you.