marlon2006
Registered Users (C)
Imagine you invoke AC21 and issue Employment Evaluation Letter from your own business. Does it matter whether the company is a "small business" or "incorporated" ?
AC21, self-employment:Small business vs Inc
- Thread starter marlon2006
- Start date
Small does not mean un-incorporated
marlon2006
Small does not mean un-incorporated. Incorporated business can also be small. SBA (small business administration) (www.sba.gov) defines what a small business is and offers aid (financial and non-financial i.e. advisory) to small businesses.
To incorporate or not is basically a decision owners have to undertaken. Unincorporated businesses are usually treated as sole proprietary businesses or partnerships - both usually carry UNLIMITED liability.
If you plan to do consulting, it would be better to incorporate and conduct business via that incorporated entity. there are some costs but this way, you would have clearly delineated you liabilities.
Also, when you incorporate, make sure you incorporate as a LIMITED LIABILITY entity - whether as an LLC, or a S-Corp or a C-Corp. You can also open a LIMITED LIABILITY PARTNERSHIP (LLP).
Taxation is also very different depending on tha structure:
S-Corp and Partnerships - profits are added to income of owners and taxed at the INDIVIDUAL tax rates for income tax
C-Corp: Corporation pays taxes on its profits and if dividens are repatriated to owners, owners pay tax on dividend income at a dividend income rate (which currently is lower than income -tax rate)
LLC: is little complicated - if you qualify as a non-publicly traded partnership, then the entity does not have to pay tax.
The provisions on DEDUCTIBILITY of LOSSES is also different
How the management should be organized is ALSO different.
Also, there are restrictions on number of owners in certain type of structures: no restrictions in C-Corp; MAX 35 for S-Corp; minimum 2 for partnerships and LLC. There may be additional restrictions on LLC.
As usual, consult a good corporate lawyer.
Regards
GCStrat
=======================
Disclaimer: I am not a lawyer not a CPA
marlon2006
Small does not mean un-incorporated. Incorporated business can also be small. SBA (small business administration) (www.sba.gov) defines what a small business is and offers aid (financial and non-financial i.e. advisory) to small businesses.
To incorporate or not is basically a decision owners have to undertaken. Unincorporated businesses are usually treated as sole proprietary businesses or partnerships - both usually carry UNLIMITED liability.
If you plan to do consulting, it would be better to incorporate and conduct business via that incorporated entity. there are some costs but this way, you would have clearly delineated you liabilities.
Also, when you incorporate, make sure you incorporate as a LIMITED LIABILITY entity - whether as an LLC, or a S-Corp or a C-Corp. You can also open a LIMITED LIABILITY PARTNERSHIP (LLP).
Taxation is also very different depending on tha structure:
S-Corp and Partnerships - profits are added to income of owners and taxed at the INDIVIDUAL tax rates for income tax
C-Corp: Corporation pays taxes on its profits and if dividens are repatriated to owners, owners pay tax on dividend income at a dividend income rate (which currently is lower than income -tax rate)
LLC: is little complicated - if you qualify as a non-publicly traded partnership, then the entity does not have to pay tax.
The provisions on DEDUCTIBILITY of LOSSES is also different
How the management should be organized is ALSO different.
Also, there are restrictions on number of owners in certain type of structures: no restrictions in C-Corp; MAX 35 for S-Corp; minimum 2 for partnerships and LLC. There may be additional restrictions on LLC.
As usual, consult a good corporate lawyer.
Regards
GCStrat
=======================
Disclaimer: I am not a lawyer not a CPA
marlon2006
Registered Users (C)
I didn't ask this correctly:
I meant, does it matter to AC21 whether you have a simpler business structure (sole proprietorship, as that is very typical for single owner, home business) or the organization requires a more complex business structure such as a corporation. Based on your question it seems there is no distinction though.
I meant, does it matter to AC21 whether you have a simpler business structure (sole proprietorship, as that is very typical for single owner, home business) or the organization requires a more complex business structure such as a corporation. Based on your question it seems there is no distinction though.
gcstrat said:marlon2006
Small does not mean un-incorporated. Incorporated business can also be small. SBA (small business administration) (www.sba.gov) defines what a small business is and offers aid (financial and non-financial i.e. advisory) to small businesses.
To incorporate or not is basically a decision owners have to undertaken. Unincorporated businesses are usually treated as sole proprietary businesses or partnerships - both usually carry UNLIMITED liability.
If you plan to do consulting, it would be better to incorporate and conduct business via that incorporated entity. there are some costs but this way, you would have clearly delineated you liabilities.
Also, when you incorporate, make sure you incorporate as a LIMITED LIABILITY entity - whether as an LLC, or a S-Corp or a C-Corp. You can also open a LIMITED LIABILITY PARTNERSHIP (LLP).
Taxation is also very different depending on tha structure:
S-Corp and Partnerships - profits are added to income of owners and taxed at the INDIVIDUAL tax rates for income tax
C-Corp: Corporation pays taxes on its profits and if dividens are repatriated to owners, owners pay tax on dividend income at a dividend income rate (which currently is lower than income -tax rate)
LLC: is little complicated - if you qualify as a non-publicly traded partnership, then the entity does not have to pay tax.
The provisions on DEDUCTIBILITY of LOSSES is also different
How the management should be organized is ALSO different.
Also, there are restrictions on number of owners in certain type of structures: no restrictions in C-Corp; MAX 35 for S-Corp; minimum 2 for partnerships and LLC. There may be additional restrictions on LLC.
As usual, consult a good corporate lawyer.
Regards
GCStrat
=======================
Disclaimer: I am not a lawyer not a CPA
No
marlon2006
I do NOT think it matters under AC21 what kind of legal organization structure you have.
However, prudent business sense suggests you limit your LIABILITIES, especially if you doing consulting and would work in different client locations.
Sole propriatary business and partnerships have unlimited liability - which means they can go after your personal assets - home, etc.
Regards
GCstrat
marlon2006
I do NOT think it matters under AC21 what kind of legal organization structure you have.
However, prudent business sense suggests you limit your LIABILITIES, especially if you doing consulting and would work in different client locations.
Sole propriatary business and partnerships have unlimited liability - which means they can go after your personal assets - home, etc.
Regards
GCstrat