BUSINESS

Businesses are usually conducted by sole proprietorships, partnerships or corporations. Each has advantages and disadvantages. You should consult with both a tax accountant and an attorney before setting up a business.

Sole Proprietorships

Sole proprietorships are one-owner businesses where the owner keeps the net profits. S/he makes all the decisions. However, s/he has unlimited personal liability for business debts.

Partnerships

Partnerships have multiple owners (partners). General partners share management and profits; however, they each have unlimited personal liability for the debts of the business. “Limited Partners” do not participate in management, and their personal liability is limited to their investment.

Corporations

Corporations are like little republics. The owners (shareholders) elect directors who appoint officers to run the business. The advantage is that the shareholders are not personally liable for business debts as long as they have not stolen business assets. The disadvantage is that corporation profits are taxed as are shareholder dividends unless operating under Subchapter S of the Internal Revenue Code.

Limited Liability Companies

Limited Liability Companies (LLCs) are relatively new creatures which combine the best features of partnerships and corporations. They operate like partnerships but provide limited liability to the owners. They can pass through their profits to their owners for tax purposes or be taxed separately like corporations.

Other

If a business operates under an assumed name, it must file a certificate to that effect at the County Clerk’s Office. The business should have its own checking account and tax identification number. Finally, the business should have appropriate insurance to protect itself, its owners and employees.

DO NOT RELY ON THIS ARTICLE. SEE AN ATTORNEY.

E-mail Paul Herrmann: pauljosephherrmann@yahoo.com