At American Corporate Enterprises, Inc., we have the expertise to handle all your incorporation needs! Contact us Toll free (888) 274-1130 or (775)884-9380 today and visit our website at www.americancorpenterprises.com.
A limited liability company is a hybrid-type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership.
The “owners” of an LLC are referred to as “members.” Depending on the state, the members can consist of a single individual (one owner), two or more individuals, corporations, other LLCs, and even other entities.
Unlike shareholders in a corporation, LLCs are not taxed as a separate business entity. Instead, all profits and losses are “passed through” the business to each member of the LLC. LLC members report profits and losses on their personal federal tax returns, just like the owners of a partnership would.
Forming an LLC
While each state has slight variations to forming an LLC, they all adhere to some general principles:
Choose a Business Name. There are 3 rules that your LLC name needs to follow: (1) it must be different from an existing LLC in your state, (2) it must indicate that it’s an LLC (such as “LLC” or Limited Company”) and (3) it must not include words restricted by your state (such as “bank” and insurance”). Your business name is automatically registered with your state when you register your business, so you do not have to go through a separate process. Read more here about choosing a business name on Business.gov.
File the Articles of Organization. The “articles of organization” is a simple document that legitimizes your LLC and includes information like your business name, address, and the names of its members. The form is provided by and filed with your state’s LLC office. For most states, you file with the Secretary of State. However, other states may require that file with a different office such as the State Corporation Commission, Department of Commerce and Consumer Affairs, Department of Consumer and Regulatory Affairs, or the Division of Corporations & Commercial Code. Note, there may be an associated filing fee.
Create an Operating Agreement. Operating agreements are not required by most states and are not filed at your state office. However, an operating agreement is highly recommended for multi-member LLCs because it structures your LLC’s finances and organization, and provides rules and regulations for smooth operation. Percentage of interests, allocation of profits and losses, member’s rights and responsibilities, and other provisions are usually included here.
Obtain Licenses and Permits. Once your business is registered, you must obtain business licenses and permits. Regulations vary by industry, state and locality. Use the Licensing & Permits tool on Business.gov to find a listing of federal, state and local permits, licenses, and registrations you'll need to run a business.
Hiring Employees. If you are hiring employees, read more about federal and state regulations for employers.
Announce Your Business. Some states, including Arizona and New York, require the extra step of publishing a statement in your local newspaper regarding the formation of your LLC. Check with your state’s business filing office for requirements in your area.
Filing Taxes
In the eyes of the federal government, an LLC is not a separate tax entity, and therefore the business itself is not taxed. Instead, all federal income taxes are passed on to the members of the LLC and are paid through their personal income tax. While the federal government does not tax income on an LLC, some states do, so check with your state’s income tax agency.
Since the federal government does not recognize LLC as a business entity for taxation purposes, all LLCs must file as a corporation, partnership, or sole proprietorship. Certain LLCs are automatically classified and taxed as a corporation by federal tax law. For guidelines to how to classify an LLC, please visit IRS.gov.
LLCs that are not automatically classified as a corporation can choose their business entity classification. To elect a classification, an LLC must file Form 8832. This form is also used if an LLC wishes to change their classification status. Read more about filing as a corporation or partnership and filing as a single member LLC at IRS.gov.
The following tax forms should be filed depending on your classification:
Single Member LLC. A single-member LLC files Form 1040 Schedule C like a sole proprietor.
Partners in an LLC. Partners in an LLC file a Form 1065 partnership tax return like owners in a traditional partnership.
LLC filing as a Corporation. An LLC designated as a corporation files Form 1120, the corporation income tax return
The IRS guide to Limited Liability Companies provides all relevant tax forms and additional information regarding their purpose and use.
Combining the Benefits of an LLC with an S-Corp
There is always the possibility of requesting S-Corp status for your LLC. A small business attorney can advise you on the pros and cons. You'll have to make a special election with the IRS to have the LLC taxed as an S-Corp using Form 2553. This must be filed prior to the first two months and fifteen days of the beginning of the tax year in which the election is to take effect. For more information about S-Corp status, visit IRS.gov or read Should My Company be an LLC, an S-Corp or Both? on Business.gov.
The LLC remains a limited liability company from a legal standpoint but for tax purposes can be treated as an S-Corp. Be sure to contact the state's income tax agency where the election form will be filed. Ask them whether or not they recognize elections of other entities such as the S-Corp and what the tax requirements are.
Advantages of an LLC
Limited Liability. Members are protected from personally liability for business decisions or actions of the LLC. This means that if the LLC incurs debt or is sued, members are not required to satisfy the claims with their personal assets. This is similar to the liability protections afforded to shareholders of a corporation. Keep in mind that limited liability means “limited” liability - members are not necessarily shielded from their or their employees' tort actions, such as accidents.
Less Recordkeeping. An LLC’s operational ease is one of its greatest advantages. Compared to an S-Corporation, there is less registration paperwork and there are smaller start-up costs.
Sharing of Profits. There are also fewer restrictions on profit-sharing within an LLC, as members distribute profits as they see fit. Members might contribute different proportions of capital and sweat-equity. Consequently, it's up to the members themselves to decide who has earned what percentage of the profits or losses.
Disadvantages of an LLC
Limited Life. In many states, when a member leaves an LLC, the business is dissolved and the members must fulfill all remaining legal and business obligations to close the business out. The remaining members can decide if they want to start a new LLC, or part ways. However, you can include provisions in your operating agreement to prolong the life of the LLC, should a member decide to leave the business.
Self-Employment Taxes. Members of an LLC are considered self-employed and must pay the self-employment tax contributions towards Medicare and social security. The entire net income of the LLC is subject to this tax.
For more information about LLC's, visit our website at http://www.americancorpenterprises.com.
Wednesday, May 26, 2010
Sole Proprietorship
A sole proprietorship is a business owned and managed by one individual who is personally liable for all business debts and obligations.
Sole proprietorships are the most common - and simplest - form of business organization. Sole proprietorships are owned by one person who is generally also responsible for the business’s day-to-day operational responsibilities. Sole proprietors operate in many different capacities, including full and part-time businesses, individually run businesses or those with employees, and traditional, home-based, or online businesses in all different industries. Sole proprietors own all assets and profits of the business and also assume complete responsibility for business liabilities and debts.
Forming a Sole Proprietorship
Unlike other business structures, when forming a sole proprietorship, you do not need to register your business with the state. Starting a sole proprietorship is often as simple as selecting a business name and obtaining appropriate licenses and permits. Check with your state business entity registration office to be sure that you’ve satisfied all local requirements.
Many states require a sole proprietor to operate under their personal name unless they formally file a trade name, or a "Doing Business As" (DBA) name.
Next, you must obtain business licenses and permits. Regulations vary by industry, state and locality. Use the Licensing & Permits tool on Business.gov to find a listing of federal, state and local permits, licenses, and registrations you'll need to run a business.
If you are hiring employees, read more about federal and state regulations for employers.
How Sole Proprietorships are Taxed
Most businesses will need to register with the IRS and state and local revenue agencies, and receive a tax ID number or permit.
Sole proprietors file their business taxes on their personal income tax returns. When filing, owners must clearly keep personal and businesses finances separate. Since the two are so closely intertwined, this is often difficult, but it’s important for all sole proprietors to maintain accurate business records.
Tax Forms for Sole Proprietors:
Sole proprietors file Schedule C or Schedule C-EZ, Profit or Loss from Business, with their Form 1040.
In some cases, additional forms are required for sole proprietors:
Self-Employment Tax – For individuals who work for themselves, this includes a social security and Medicare tax. The IRS Guide to Self-Employment Tax has more information on paying this tax.
Estimated Tax – Used to pay tax on income that is not subject to withholding. Sole proprietors generally must pay estimated taxes for $1000 or more when filing their return. The IRS Guide to Estimated Taxes has more information on calculating and completing these forms.
The IRS guide to Federal Tax forms for Sole Proprietorships provides these forms and instructions regarding their use.
Advantages of a Sole Proprietorship
Easy and Inexpensive. For inexperienced entrepreneurs, sole proprietorships are a practical incorporation option - they are generally the least expensive and simplest business structure. Similarly, they are also easy to dissolve if the business does not go as planned.
Control of Operations. Sole proprietors are in complete control of their business. Within the parameters of business laws and regulations, owners have the right to make all operating decisions regarding their business as they see fit..
Receive and Allocate Income. All income generated by a sole proprietorship is received by the owner to keep or reinvest according to their discretion.
Disadvantages of a Sole Proprietorship
Unlimited Liability. With the privilege of total control, sole proprietors also assume liability. Owners are legally responsible for their business’s financial obligations, meaning your personal assets can be used to help satisfy debt incurred by the business.
Funding Difficulties. Sole proprietorships are often at a disadvantage when it comes to raising capital. Because sole proprietorships tend to start small and can be relatively unstable, investors are typically not drawn to them. Start-up capital is often limited to a combination of personal assets and loans.
Attracting Employees. Sole proprietorships tends to be less attractive to prospective employees because they generally do not offer as many employment benefits. There is also no chance of ownership potential, which may turn off driven workers. For more information about Sole Proprietorships, visit our website at www.americancorpenterprises.com
Sole proprietorships are the most common - and simplest - form of business organization. Sole proprietorships are owned by one person who is generally also responsible for the business’s day-to-day operational responsibilities. Sole proprietors operate in many different capacities, including full and part-time businesses, individually run businesses or those with employees, and traditional, home-based, or online businesses in all different industries. Sole proprietors own all assets and profits of the business and also assume complete responsibility for business liabilities and debts.
Forming a Sole Proprietorship
Unlike other business structures, when forming a sole proprietorship, you do not need to register your business with the state. Starting a sole proprietorship is often as simple as selecting a business name and obtaining appropriate licenses and permits. Check with your state business entity registration office to be sure that you’ve satisfied all local requirements.
Many states require a sole proprietor to operate under their personal name unless they formally file a trade name, or a "Doing Business As" (DBA) name.
Next, you must obtain business licenses and permits. Regulations vary by industry, state and locality. Use the Licensing & Permits tool on Business.gov to find a listing of federal, state and local permits, licenses, and registrations you'll need to run a business.
If you are hiring employees, read more about federal and state regulations for employers.
How Sole Proprietorships are Taxed
Most businesses will need to register with the IRS and state and local revenue agencies, and receive a tax ID number or permit.
Sole proprietors file their business taxes on their personal income tax returns. When filing, owners must clearly keep personal and businesses finances separate. Since the two are so closely intertwined, this is often difficult, but it’s important for all sole proprietors to maintain accurate business records.
Tax Forms for Sole Proprietors:
Sole proprietors file Schedule C or Schedule C-EZ, Profit or Loss from Business, with their Form 1040.
In some cases, additional forms are required for sole proprietors:
Self-Employment Tax – For individuals who work for themselves, this includes a social security and Medicare tax. The IRS Guide to Self-Employment Tax has more information on paying this tax.
Estimated Tax – Used to pay tax on income that is not subject to withholding. Sole proprietors generally must pay estimated taxes for $1000 or more when filing their return. The IRS Guide to Estimated Taxes has more information on calculating and completing these forms.
The IRS guide to Federal Tax forms for Sole Proprietorships provides these forms and instructions regarding their use.
Advantages of a Sole Proprietorship
Easy and Inexpensive. For inexperienced entrepreneurs, sole proprietorships are a practical incorporation option - they are generally the least expensive and simplest business structure. Similarly, they are also easy to dissolve if the business does not go as planned.
Control of Operations. Sole proprietors are in complete control of their business. Within the parameters of business laws and regulations, owners have the right to make all operating decisions regarding their business as they see fit..
Receive and Allocate Income. All income generated by a sole proprietorship is received by the owner to keep or reinvest according to their discretion.
Disadvantages of a Sole Proprietorship
Unlimited Liability. With the privilege of total control, sole proprietors also assume liability. Owners are legally responsible for their business’s financial obligations, meaning your personal assets can be used to help satisfy debt incurred by the business.
Funding Difficulties. Sole proprietorships are often at a disadvantage when it comes to raising capital. Because sole proprietorships tend to start small and can be relatively unstable, investors are typically not drawn to them. Start-up capital is often limited to a combination of personal assets and loans.
Attracting Employees. Sole proprietorships tends to be less attractive to prospective employees because they generally do not offer as many employment benefits. There is also no chance of ownership potential, which may turn off driven workers. For more information about Sole Proprietorships, visit our website at www.americancorpenterprises.com
Tuesday, May 4, 2010
American Corporate Enterprises, Inc. - Limited Partnership
American Corporate Enterprises, Inc. - Entity Types: "Limited Partnership
This particular entity has basically the same attributes as a General Partnership except for one very important distinction: It has Limited Partners who usually do not have liability for business management responsibilities. Find out more about LPs by visiting our website at http://www.americancorpenterprises.com/types_lp.html"
This particular entity has basically the same attributes as a General Partnership except for one very important distinction: It has Limited Partners who usually do not have liability for business management responsibilities. Find out more about LPs by visiting our website at http://www.americancorpenterprises.com/types_lp.html"
American Corporate Enterprises, Inc. - S Corporation
American Corporate Enterprises, Inc. - Entity Types: "S Corporation
The S Corporation also offers the limited liability factor, but is also not a taxable entity at all. However, while the S Corporation is not taxed, the profits it generates, whether distributed or not, is taxable to the shareholders at their own personal tax rate. Find out more about S-Corps here"
The S Corporation also offers the limited liability factor, but is also not a taxable entity at all. However, while the S Corporation is not taxed, the profits it generates, whether distributed or not, is taxable to the shareholders at their own personal tax rate. Find out more about S-Corps here"
American Corporate Enterprises, Inc. - Limited Liability Company
American Corporate Enterprises, Inc. - Entity Types: "Limited Liability Company
In recent years this relatively new business entity (new compared to corporations that is) has generated a substantial amount of interest due to the fact that it provides both the limited liability of a Corporation and the single level pass through taxation of a Limited Partnership. Find out more about LLCs..."
In recent years this relatively new business entity (new compared to corporations that is) has generated a substantial amount of interest due to the fact that it provides both the limited liability of a Corporation and the single level pass through taxation of a Limited Partnership. Find out more about LLCs..."
American Corporate Enterprises, Inc. - Why Incorporate?
American Corporate Enterprises, Inc. - Why Incorporate?:
Because of the length of time corporations have been in existence, there is a long record of statutory and case law which supports the use of a corporation for asset protection.
Consequently, corporations are traditionally considered for use as the “First Line of Defense” to accomplish the goal of limited liability. Following are some important attributes and advantages to a corporation which allow it to be used for limited liability as well as other purposes."
•The corporation is a totally separate entity from any individual- it is not you, and you are not it. This is important to remember in maintaining the limited liability protection. It must be treated as a separate individual
•A corporation can buy, sell, trade, own property, own stock, make loans, etc. and anything else that an individual can do; such actions are governed by the Board of Directors
•The shareholders of the corporation do not have to live in the state in which the corporation is domiciled. Fortunately, here in Nevada, neither do the Officers or Directors
•Corporations have perpetual existence- if a Director or Officer becomes deceased, the corporation will still exist, unlike with some other entities
•There are many tax deductions available to corporations, which are not available to other entities
•It is easy to transfer assets and ownership of a corporation
•Centralized management allows ease of doing business
•Full fringe benefits can be established through a corporation
•A corporation has all of the rights of an individual except for the Fifth Amendment
Please be advised that we are not engaged in rendering legal counsel or accounting services. If legal advise, or other such services and assistance is required, the services of a professional person in that area should be sought. At your request, however, we may consult with you and render our opinion based on our business experience.
American Corporate Enterprises works with and provides services to Attorneys, CPAs, Financial Consultants, etc. in order to meet the needs of our clients. We would be happy to refer you to such a professional at your request.
Find out more about American Corporate Enterprises by visiting our website at http://www.americancorpenterprises.com.
Because of the length of time corporations have been in existence, there is a long record of statutory and case law which supports the use of a corporation for asset protection.
Consequently, corporations are traditionally considered for use as the “First Line of Defense” to accomplish the goal of limited liability. Following are some important attributes and advantages to a corporation which allow it to be used for limited liability as well as other purposes."
•The corporation is a totally separate entity from any individual- it is not you, and you are not it. This is important to remember in maintaining the limited liability protection. It must be treated as a separate individual
•A corporation can buy, sell, trade, own property, own stock, make loans, etc. and anything else that an individual can do; such actions are governed by the Board of Directors
•The shareholders of the corporation do not have to live in the state in which the corporation is domiciled. Fortunately, here in Nevada, neither do the Officers or Directors
•Corporations have perpetual existence- if a Director or Officer becomes deceased, the corporation will still exist, unlike with some other entities
•There are many tax deductions available to corporations, which are not available to other entities
•It is easy to transfer assets and ownership of a corporation
•Centralized management allows ease of doing business
•Full fringe benefits can be established through a corporation
•A corporation has all of the rights of an individual except for the Fifth Amendment
Please be advised that we are not engaged in rendering legal counsel or accounting services. If legal advise, or other such services and assistance is required, the services of a professional person in that area should be sought. At your request, however, we may consult with you and render our opinion based on our business experience.
American Corporate Enterprises works with and provides services to Attorneys, CPAs, Financial Consultants, etc. in order to meet the needs of our clients. We would be happy to refer you to such a professional at your request.
Find out more about American Corporate Enterprises by visiting our website at http://www.americancorpenterprises.com.
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