llc or corporation, how to choose the right form for your business 2nd (2006)

[...]... want to prepare an LLC Â�operating agreement Want more information about LLCs? See Form Your Own Limited Liability Company, by Anthony Mancuso (Nolo), for instructions on how to form an LLC in each state, how to prepare an operating agreement, and how to handle other LLC formation requirements You can also learn more about LLC formation procedures and fees for your state by visiting 18 LLc or corporation... Every growing business changes its form of entity Most start as sole proprietorships or partnerships and then evolve into corporations or LLCs The business entity you choose today may affect your choice of entity in the future In other words, you’re not just picking a business form; you’re plotting a business strategy The more information you have, the better equipped you will be to plot the right course... tax treatment Corporations A corporation, like an LLC, is a statutory creature, created and regulated by state law In short, if you want the “privilege”—that’s what the courts call it—of turning your business enterÂ�prise into a corporation, you must follow the requirements of your state’s business corporation law or business corporation act (BCA) What sets the corporation apart, in a theoretical sense,... sole proprietorship However, this exception will not apply if your spouse wants to play a more significant role in the business, for example, to have a say in Â�management decisions or have the authority to sign checks and take on obligations for the company In that case, your business will be treated for tax Â�purposes as a partnership Liability for Business Debts Unfortunately, although forming and... Unincorporated business owners can deduct the cost of health insurance Current federal tax law allows sole proprietors, partners, and LLC owners who work as employees in their business to deduct the full cost of health insurance premiums paid out by their business for themselves and the other employees in the business This tax break—formerly only available to corporations—is now available to unincorporated... Although the focus of this book is on choosing whether to form an LLC or a corporation, you cannot make an informed decision without learning about all the types of business entities—including sole proprietorships, partnerships, LLCs, and corporations This book explains the legal and tax characteristics of each of these business entities and the basic rules for converting one type of business to another... proprietorship has only one owner If your oneperson  business grows and you wish to include other owners, you will need to choose another business structure, such as a partnership, LLC, or corporation Businesses Owned by Spouses Businesses owned by married couples can be organized in a variety of ways for example, as an S or C corporation, an LLC, or a formal partnership If you don’t take any steps to choose. .. corporations: “C” corporations and “S” corporations A C corporation is just another name for a regular for- profit corporation—a corporation taxed under normal corporate income tax rules The letter C comes from Subchapter C of the Internal Revenue Code and is used to distinguish these regular corporations from “S” corporations, a more specialized type of corporation that is regulated under Subchapter S of the Internal... about the best business structure for their new sideline business Without taking any formal action or creating a partnership agreement, they have formed a partnership If the 12 LLc or corporation partners were to have a dispute—over the division of profits, perhaps—in the absence of an agreement, state partnership law would control the outcome Once they realize that their informality might subject them... of forming a sole proprietorship, it actually isn’t If that same sole proprietor had instead formed a one-person corporation, he or she would personally pay half of the tax and the corporation would pay the other half The money would come from two different sources, and the tax reporting requirements are different, but the whole amount still ultimately comes out of the owner’s pocket 10 LLc or corporation . Photography TONYA PERME (www.tonyaperme.com) Printing DELTA PRINTING SOLUTIONS Mancuso, Anthony. LLC or corporation? : how to choose the right form for your business / by Anthony Mancuso 2nd. growing business changes its form of entity. Most start as sole proprietorships or partnerships and then evolve into corporations or LLCs. The business entity you choose today may affect your.