Whether you’re an aspiring independent contractor, franchisee, or entrepreneur, you have some key items to take care of. While opening your own business is exciting and thrilling, it’s everything that comes after the excitement has worn off that dictates whether your small business will succeed or not. The first item to check off your list is business registration. We can help you determine which type of business ownership is best for you and assist in filing with the appropriate agencies.
A Sole Proprietorship is a quick way for a single owner to start a business. While they are the easiest type of business registration to establish and have low start-up costs, the downside is that the individual’s finances are connected to the business’s finances.
A Limited Liability Company (LLC) is the most common entity in business registration. With our help they are fairly simple to start. The start-up filing fees are higher than Sole Proprietorship, but they allow separation of the individual’s finances from the business.
Corporations have the most steps required to get off the ground. They have low liability and shared responsibility among owners. However, they are subject to double taxation and have the most expensive start-up fees.
An S Corp is a corporation that elects to pass corporate income, losses, deductions, and credits through to its shareholders for federal tax purposes. This pass-through taxation means that income is taxed at the individual shareholder level, avoiding double taxation.
Advantages:
Single Layer of Taxation: Profits are taxed only at the individual level, preventing the double taxation faced by C Corps.
Pass-Through of Losses: Shareholders can use corporate losses to offset other income on their personal tax returns, subject to certain limitations.
Qualified Business Income Deduction: Eligible shareholders may deduct up to 20% of their share of the business’s qualified income.
Disadvantages:
Ownership Restrictions: Limited to 100 shareholders, all of whom must be U.S. citizens or residents.
Single Class of Stock: Only one class of stock is permitted, which can limit flexibility in raising capital.
Transfer Restrictions: Shares cannot be owned by other corporations, LLCs, partnerships, or many trusts, potentially complicating ownership transfers.
A C Corp is a standard corporation subject to corporate income tax. It can have an unlimited number of shareholders and multiple classes of stock, making it suitable for businesses seeking to raise substantial capital.
Advantages:
Unlimited Shareholders: No restrictions on the number or type of shareholders, facilitating capital raising and expansion.
Multiple Classes of Stock: Ability to issue various stock classes, including preferred stock, attracting a broader range of investors.
Lower Corporate Tax Rate: As of 2018, a flat corporate tax rate of 21% may offer tax advantages, especially if profits are reinvested rather than distributed.
Disadvantages:
Double Taxation: Earnings are taxed at the corporate level, and dividends are taxed again at the individual shareholder level.
Increased Regulatory Requirements: Subject to more stringent regulations and reporting obligations, which can increase administrative burdens.
Potential Higher Overall Taxes: Depending on individual circumstances, the combined corporate and individual taxes may exceed the taxes paid under a pass-through entity like an S Corp.
Once your business is registered, it will need to be renewed annually. As your business grows, you may find that you need to change its registration type. King of Kings Firm can assist with those needs.
Properly setting up your Quickbooks is vital for information to be accurate moving forward. It is also necessary to have manually kept accounts properly organized. These tasks are complicated further should you need to switch from manual to QuickBooks in the middle of the year.
Our experts can easily answer all of these questions and complete the initial Setup and Installation in a timely manner. We’ll also train your staff in how to properly make entries and successfully complete tasks further saving you valuable time and money.
Consultations are free.
Let us provide expert tax advisory and accounting services so you can concentrate on your business… and spend more time with your family. Fill out the form here or call the number below.
INVESTORS, BUSINESS OWNERS, HIGH-INCOME EARNERS DON’T MISS:
TAX SAVING
STRATEGIES
to grow and scale your business
Atlanta | January 18 | 8am – 3pm
