What steps do you need to take?
- Write your business plan.
- Figure out funding for your business.
- Choose a business structure.
- Choose your business name.
- Register your business.
- Get federal and state tax IDs.
- Apply for licenses and permits.
- Open a business bank account.
What are the different types of business structures?
LLC, Sole-Proprietorship, Partnership, Corporation (within a corporation you can be either a C Corporation or an S Corporation). Knowing which one to do requires you to know about each of the types.
What is an LLC?
An LLC is a limited liability company. It is a business entity specifically authorized by Kentucky statutes. An LLC allows the owners to not be held personally liable for the company debts, which is similar to a corporation. LLCs are also similar to a partnership or sole proprietorship as they are flexible in their operation. As far as taxes, the entity does not pay taxes; rather, the taxes owed flow through to the owners.
What is the difference between an LLC and a corporation?
An S corporation’s tax set up is similar to an LLC, but the LLC is more flexible on the restrictions for the owners. An S corporation cannot have more than 100 shareholders, and all of those shareholders must be U.S. citizens or legal residents of the U.S. There are annual meetings held by the shareholders of S corporations each year. These meetings will have minutes taken which are recorded. LLC’s, while not required to hold annual meetings, may be held to higher self-employment tax than the owner of an S corporation. Taxes for an S corporation are paid on the self-employment salary and not on the dividends from the corporation.
What is the difference between a C corporation and an S corporation?
Corporations that are not considered S corporations are considered C corporations. The income from a C corporation is taxed twice, once on the net income, and once on the shareholders when they receive their income. S corporations are very popular with small business owners, while C corporations are generally favored by large corporations.
What can we do to help you?
Our attorneys here at Skeeters, Bennett, Wilson & Humphrey have years of experience helping people create and manage their small businesses. We pride ourselves in helping people in our community understand the ins and outs of the creation process as well as maintaining records required by the Secretary of State. While we are not tax professionals, we, along with a certified tax professional, will help ensure you choose what is best for you. Contact us to schedule a meeting with one of our attorneys.