Fortunately there are several options to choose from. Some research and
perhaps the advice of an attorney may be necessary when determining how
to set up a business but below are the most common business structures.

C-Corporation

The C-Corporation acts as a separate legal entity which is distinct from
shareholders. There is no limit to the number of shareholders and shares
can be held by non residents and citizens who do not reside in the United
States. The corporation must pay federal and state income taxes on
earnings. The earnings are distributed to shareholders and the
shareholders are also taxed. Double taxation occurs.

Benefits of the C-Corporation

  • Limited liability for the directors, officers, shareholder and employees
    of the corporation.

  • C-Corporations can attract potential investors through the sale of
    shares of stocks.

  • More than one type of stock can be issued.

  • The C-Corporation exists whether or not the owners leave the
    business.

  • Standard business expenses can be deducted as well as benefits to
    employees.

  • Fringe benefits may be deducted such as group term life insurance,
    health and disability insurance, death benefits and employee medical
    expenses not paid by insurance as a business expense.

  • Shareholders who are also employees are exempt from paying taxes
    on fringe benefits.  

  • Profit and loss can be split between the owners and the business to
    lower the overall tax rate.

  • Corporate losses can be carried over to future tax years.

S-Corporation

The S-Corporation is generally exempt from corporate income taxes on
its profits. The shareholders pay income taxes on their proportionate
share of the profits. Shareholders report the income and pay taxes, if
any. One of the issues associated with the (C) corporation is that the
corporation along with its owners are taxable.  This is where the term
"double taxation" comes into play because the corporate income is often
taxed twice.  

Benefits of the S-Corporation

  • Limited liability like C-Corporations. S-Corporations are also
    considered to be to be separate entities apart from their owners.

  • Debts incurred by the corporation are the responsibility of the
    corporation, not its shareholders, who can only be held accountable
    up to the amount they invested in the corporation.

  • No double taxation as in the C-Corporations.  According to the
    Internal Revenue Service, an S corporation is not a separate taxable
    entity, the corporation's profits are considered to be the
    shareholders' .

  • Losses appear on the shareholders’ personal income tax returns just
    as profits do so at the end of the year if the corporation experiences
    losses shareholders end up owing less or even no taxes after they
    deduct their share of the corporation’s losses.

Sole-Proprietorships

A sole proprietorship is set up to allow an individual to own and operate a
business by him/herself. A sole proprietor has total control, receives all
profits from and is responsible for taxes and liabilities of the business . If a
sole proprietorship is formed with a name other than the individual's name,
a Fictitious Business Name Statement must be filed with the county where
the principal place of business is located. It is a very common, simple
business structure which is easy to start-up and maintain. However, you are
the business and any liabilities belong to you.

Limited Liability Partnership

The Limited Liability Corporation is similar to the S-Corporation. The profits
of the LLC go to the shareholders/employees rather than to the business.
Owners have limited personal liability for the debts and actions of the LLC.  
Owners of an LLC are called members. Members may include individuals,
corporations, other LLCs and foreign entities.  There is no maximum
number of members. Most states permit “single member” LLCs, those
having only one owner.

Benefits of the LLC

  • Limited liability of the members for acts and debts of the LLC.

  • No requirement of an annual general meeting for shareholders.

  • Limited paperwork and record keeping as compared to the C-
    Corporation and S-Corporations.

  • No double taxation unless the LLC elects to be taxed as a C-
    Corporation.

  • Profits are taxed personally at the member level, not at the LLC level.

  • In most States, not all, LLCs are treated as separate entities from
    their members.

Partnerships

A partnership exists between two or more persons who join together to
carry on a trade or business. Each person contributes to the partnership
and the partners share in the profits as well as losses.

There are also incorporating services that will incorporate your business
and provide the necessary documentation online.  

Shelf or Aged Corporations

You can also purchase a “shelf” or “aged” corporation in the State where
you want to do business. A shelf or aged corporation is one which has no
activity and is created and put on the “shelf” to age and use at a later date.
There are companies which sell shelf corporations.
How to Structure Your
Business: Learn the various
ways to set-up a business
www.rebuildcreditscores.com
It is very common for new
entrepreneurs to set up their
business as a sole proprietor.

As your business grows and
expands, you may find the
need to restructure your
business to ensure optimal
chances for financing,
obtaining large contracts or
tax purposes.  

Even after a decision is made,
the nature of your business
may change and the structure
may need to change again.
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Determining how to structure a  business is one of the first steps an
entrepreneur must make.  The proper business structure may make the
difference between being approved for a small business loan and even
business credit cards.
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