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    陈宝国无敌系列六部

    The first step in choosing a business structure is determining if you need personal liability protection.

    陈宝国无敌系列六部Businesses that earn a profit or carry any risk need liability protection.陈宝国无敌系列六部

    陈宝国无敌系列六部What is personal liability protection?陈宝国无敌系列六部 When a business owner has personal liability protection, they can't be held personally responsible if the business suffers a loss. This means personal assets (car, house, and bank account) are protected.

    陈宝国无敌系列六部Formal business structures陈宝国无敌系列六部 like LLCs and corporations offer liability protection because the business is legally separated from its owner. 

    陈宝国无敌系列六部Informal business structures陈宝国无敌系列六部 like sole proprietorships and partnerships don't offer protection because there isn't any separation between the business and the owner. Therefore, the owners' personal assets are completely exposed to creditors and lawsuits.

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    Visit our Cost to Form an LLC guide to learn more about 陈宝国无敌系列六部forming an LLC陈宝国无敌系列六部.

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    陈宝国无敌系列六部Informal business structures like sole proprietorships and general partnerships are best for businesses with the following characteristics:陈宝国无敌系列六部

    • They MUST be 陈宝国无敌系列六部low profit and low risk 陈宝国无敌系列六部(low chance of liability or financial loss)
    • They have a smaller customer base; often friends, family, and neighbors
    • They sometimes start as hobbies like photography, blogging, or video streaming

    diagram showing the benefits of informal business structures

    陈宝国无敌系列六部

    The biggest 陈宝国无敌系列六部advantage陈宝国无敌系列六部 of starting a sole proprietorship or partnership is simplicity; it couldn't be any easier or less expensive to get a business up and running.

    陈宝国无敌系列六部Disadvantages of Informal Business Structures:陈宝国无敌系列六部

    陈宝国无敌系列六部

    陈宝国无敌系列六部Formal business structures like LLCs and corporations are recommended for businesses with the following characteristics:陈宝国无敌系列六部

    • Larger customer base
    • Potential for immediate and sustainable profit
    • Increased risk of liability or loss
    • Would benefit from unique tax options

    diagram showing the benefits of formal business structures

    陈宝国无敌系列六部

    Personal liability protection is the primary factor to consider when choosing a business structure. Luckily, it's fairly simple to tell if you need it.

    If you expect to make a profit: and/or there could be business liability or risk, you must have personal liability protection.

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    If you don't expect to earn much of a profit or be held liable for an injury etc., you can form your business simply by operating it. In most states, a sole proprietorship doesn't require any type of registration with the government.

    Some states require general partnerships to register their business names. To research whether this applies in your state, visit our How to File a DBA guide and choose your state from the drop-down.

    陈宝国无敌系列六部

    If you expect to earn a profit or if there is any potential risk in operating your business, you must operate under a formal legal structure to protect your personal assets.

    LLCs are simple to start and maintain and most small business owners choose to form an LLC.

    Our Cost to Form an LLC is a helpful guide for making the choice to operate as a sole proprietor vs LLC.

    Next, we will guide you through choosing between an LLC vs a corporation. Then, we will discuss when it makes sense to opt for the S corp tax designation.

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    Visit our 陈宝国无敌系列六部Form an LLC guide for simple step-by-step instructions for forming your LLC.

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    陈宝国无敌系列六部Most small businesses start as limited liability companies (LLCs). An LLC is most likely the best structure for your business if: 

    陈宝国无敌系列六部

    • you need liability protection
    • you plan to invest most of your profit back into the business each year
    • you would benefit most from an easy to maintain business structure

    陈宝国无敌系列六部

    If you expect to reinvest most of the profit back into your small business, an LLC is the right choice.

    Small businesses usually carry very little profit from one tax year to the next. This is because small businesses often spend most of their income on expenses to help the business grow.

    陈宝国无敌系列六部Pass-Through Taxation陈宝国无敌系列六部

    Pass-through taxation means the net income (profit minus expenses) of the business passes through to the LLC member(s) individual tax returns. This means the business itself will not be taxed and you will only be subject to income tax on the business's net income. Distributions are subject to both income tax and FICA taxes.

    A corporation's net income is taxed once on the corporate level at 21%. If any of that profit is paid as dividends to shareholders, they pay income tax and FICA taxes on the dividend as well.

    To learn more, read our LLC vs. Corporation Taxes guide. 

    陈宝国无敌系列六部

    Limited liability companies (LLC) are a simple business structure: they require less paperwork, less administrative overhead, and are much easier to start and maintain than a corporation. 

    LLCs are also adaptable and can elect to become corporations at a later date. This makes LLCs a great starting point for your business to grow.

    陈宝国无敌系列六部

    If a small business is unable to spend a significant amount of its profit during a tax year on expenses to grow the business, it could make sense to structure the business as a corporation rather than an LLC. This is because of the difference in the way the two business entities are taxed.

    A corporation is taxed at about 15% for all profits that carry over to the next tax year. In this same scenario, an LLC member's tax burden would be greater because they pay FICA taxes and federal and state income taxes, which are higher than the 15% corporate rate.

    That said, a business owner who anticipates needing to carry profit into the next tax year should look closely at the financial benefits of forming a corporation. 

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    If you need to attract investors, starting a corporation could be the best choice for your small business.

    An investor in a corporation pays taxes on dividends only when they receive them whereas an investor in an LLC would have to pay taxes regardless of whether they received a distribution or not. The LLC investor might never see a return on their investment but might have to pay taxes every year regardless. This is why investors prefer C corps.

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    If the benefits of managing a complex business structure outweigh the costs, starting a corporation could make sense for your small business.

    Corporations are more complex organizations compared to LLCs, with increased administrative overhead, more paperwork, and complex compliance requirements. Managing a corporation may require help from an attorney or accountant which can increase overall business costs.

    To learn more about the complexities of running a corporation, visit our How to Start a Corporation guide.

    陈宝国无敌系列六部

    If your business will benefit most from a corporate structure, visit our How to Start a Corporation page and select your state from the drop-down menu. We provide easy to follow steps for starting (and running) a corporation yourself.

    陈宝国无敌系列六部

    Small businesses陈宝国无敌系列六部 陈宝国无敌系列六部often benefit most from forming an LLC vs a corporation. We offer easy to follow guides for starting an LLC in every state. Visit our 陈宝国无敌系列六部How to Form an LLC page and select your state from the drop-down menu to get started today.

    陈宝国无敌系列六部Recommended:陈宝国无敌系列六部 Continue reading below for more information about the S corporation tax designation for LLCs.

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    The S corp tax classification allows business owners to be taxed as employees of an LLC. Under an S corp, the LLC business owner pays FICA (Medicare and Social Security Tax) and federal income tax on only their salary.

    陈宝国无敌系列六部

    陈宝国无敌系列六部

    The steps to starting a business vary depending on the type of business you plan to start and the state in which it will operate. You can find detailed information in our How to Start a Business, How to Start a Corporation, and 陈宝国无敌系列六部How to Form an LLC guides. Simply select your state from the drop-down menu to see its specific steps and requirements.

    陈宝国无敌系列六部

    There are four main types of business structures: 

    Several additional types exist within these main groups, such as nonprofit corporations, benefit corporations, single-member, and multi-member LLCs, limited partnerships, general partnerships, and more.

    陈宝国无敌系列六部

    Yes. The process for changing your business structure varies depending on the type of change and the state in which your business is located.

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    An informal business structure is a category that includes 陈宝国无敌系列六部sole proprietorships陈宝国无敌系列六部 and 陈宝国无敌系列六部general partnerships陈宝国无敌系列六部. In these structures, there’s no legal separation between the business and the owners.

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    A formal business structure is a category that includes 陈宝国无敌系列六部corporations陈宝国无敌系列六部 and 陈宝国无敌系列六部LLCs陈宝国无敌系列六部. In these structures, the businesses are separate legal entities from their owners.

    陈宝国无敌系列六部

    The best type of structure for your business will depend on your business’s particular characteristics and needs. An LLC structure may be the best choice for some businesses while a corporation or partnership might work better for others.

    陈宝国无敌系列六部

    The best business structure for a small business will depend on that business’s particular characteristics and needs. There is no single answer for all small businesses. However, small businesses use the 陈宝国无敌系列六部LLC陈宝国无敌系列六部, 陈宝国无敌系列六部partnership陈宝国无敌系列六部, and 陈宝国无敌系列六部sole proprietorship陈宝国无敌系列六部 structures more often than a corporate structure.

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    Pass-through taxation is a system of taxation that generally applies to sole proprietorships, partnerships, LLCs, and S corps. In this system, a business’s profits or losses are not taxed at the business level. Instead, they pass through to the owners’ personal tax returns and are taxed at each owner’s personal income tax rate.

    陈宝国无敌系列六部

    Limited liability protection means that a business owner’s personal assets are protected in the event that the company goes into debt or faces a lawsuit. Corporations, LLCs, and LLPs each offer limited liability protection. Sole proprietorships and partnerships do not.

    陈宝国无敌系列六部

    Formal business structures, such as corporations and LLCs, potentially offer tax benefits. The best tax structure for a business will depend on its particular characteristics.

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    An 陈宝国无敌系列六部S corporation陈宝国无敌系列六部 (S corp) is a tax designation applicable to either an LLC or a corporation. Under this tax structure, the Internal Revenue Service treats owners as employees. The owner-employee then pays FICA taxes and income taxes on only their reasonable salary. Distributions are subject to only federal and state income taxes. 

    S corps can have additional advantages as well as disadvantages, which you can read about in our What is an S Corporation article.

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    The best structure will depend on your business’s particular characteristics and needs. However, it’s generally a good idea to choose a structure with limited liability protection when the business involves rental properties. This includes 陈宝国无敌系列六部LLCs陈宝国无敌系列六部 and 陈宝国无敌系列六部corporations陈宝国无敌系列六部.

    陈宝国无敌系列六部

    Hiring an attorney may or may not be necessary when starting a business. It depends on the type of business structure you choose and your level of comfort with the process. Starting a sole proprietorship is quite simple. Forming an LLC is a bit more complicated, but can typically be done without the help of an attorney. Starting a corporation is a more complex process than starting an LLC so hiring an attorney is often advised.

    Read our How to Start a Business, How to Start a Corporation, and 陈宝国无敌系列六部How to Form an LLC guides to learn more about the process of starting a business and decide if you need to hire an attorney.

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    With corporations, income is taxed at the corporate level and then the owners must pay personal income tax on the dividends they receive. Because profits are effectively taxed twice, this is often referred to as double taxation.

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    Different states and localities have their own rules regarding business licenses. Check with your state and local government offices to determine the specific requirements for your business.

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    If your business is a corporation, multi-member LLC, partnership, or trust, it needs an Employer Identification Number (EIN). Single-member LLCs and sole proprietorships that have employees also must obtain an EIN.

    陈宝国无敌系列六部