Entrepreneur Mom
with Aliza Sherman
If you own a business - home-based or otherwise - this is the blog where you'll find practical tips and smart ideas about entrepreneurship. I've started and run 4 different businesses so "been there, done that." I'll also invite successful entrepreneurs to share their best advice with you.
To learn more about Aliza, check out her profile on Work It, Mom! and her website, www.mediaegg.com.
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My company Moonbow Productions, Inc. is an S-Corporation. What is yours?
I turned to Areva D. Martin, Esq, a managing partner and president of Martin & Martin, LLP to better understand the different ways a company can be formed.
Q: What are the main differences between a C and an S corporation that a new business owner should consider?
A: Most of the differences between a C corporation and an S corporation have to do with the tax consequences of revenue earned by the company. Before deciding on whether to form a C versus an S corporation, entrepreneurs should consult with a CPA and/or tax attorney. The main benefit of incorporating - limited liability for the owner - applies to both C and S corporations. There are limitations with respect to S corporations and generally S corporations are reserved for small privately owned businesses.
Q: What are some signs that a sole proprietor really should incorporate or establish another more formal form of business?
A: As a sole proprietor’s business begins to grow in revenue, employees, product distribution and/or demographics, serious consideration should be given to incorporating. The cost of incorporating is relatively minimal compared to the tremendous benefit of limited liability which applies to owners in properly established and operated corporations.
Q: When might it be beneficial to form an LLC instead of incorporating?
A: Individuals who opt to form an LLC are like those who choose S corporations in that they are motivated by the manner in which revenue from that form of ownership is taxed. An LLC cannot be publicly traded and there are restrictions on earnings. LLC differ from corporations in that there is a single versus double taxing structure.
Q: Approximately how much might it cost a business owner to form an LLC or to incorporate?
A: The price of incorporating either an LLC or an S corporation will vary based on whether an individual uses a business attorney versus a paralegal-type service. The price will also vary based on the state in which the business is incorporated and the prices range from internet services which charge as little as $250.00 to a high end of $1,200.00. The key in deciding which option to pursue is verifying the experience and track record of the professional selected.
We’ll talk more about incorporating and different forms of business in the coming weeks. If you have any specific questions on these lines, please leave a comment!
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It’s a little different up here in Canada. You may have heard that we pay more in taxes, lol… the year before I incorporated I had to pay almost 50% of my writing income in taxes because it was over and above my ‘regular job’ income and it was considered in the next tax bracket.
So I incorporated and now all my writing money is taxed at 16%. Much nicer!
I was also able to incorporate on my own by following a package/book that told me exactly how to do it.
Heather
http://www.heather-cook.com
Heather Cook | September 1st, 2007 at 4:55 pm
This was very helpful! It got me thinking about the idea again..
Fleep Tuque | September 13th, 2007 at 1:13 am
[...] 1. Structure - Check with both your accountant and a lawyer about the best way to structure your business (sole proprietorship, LLC, corporation). [...]
Work It, Mom! | A Community for Professional Moms | October 18th, 2007 at 7:35 pm