When
you start a business, you must decide whether
you will set up a sole proprietorship, a
partnership, a limited liability corporation,
or a corporation.
Let's
take a look at some of the advantages and
disadvantages of each legal structure:
Sole Proprietorship
For many small business
owners, either a sole proprietorship or a
partnership (if more than one person is
involved) is usually sufficient. They
are simple and inexpensive to create and
operate, and all profits and losses are
reported on the owner's personal income tax
return. The main drawback to a sole
proprietorship is that the owner is
personally liable for the debts of the
business.
Corporations
Forming a corporation is
more costly and complicated, but if personal
liability is a worry, it's worth the
extra time and money. The main benefit
of a corporation is that it protects a
company's assets. It also creates a
"corporate veil" reducing the
corporate officers' liability should legal
action be taken against the
corporation. Once you incorporate your
business, no other business can legally use
your corporate name.
S Corporation
The owners of an S
corporation have limited personal liability
for business debts, and each owner's share of
the profits or losses of the corporation are
reported on their personal income tax
returns. In addition, the owners may
use any corporate loss to offset other
income, based on their ownership percentage.
Nonprofit Corporation
A nonprofit corporation does
not pay income taxes, and contributions to a
charitable corporation are tax
deductible. In addition, fringe
benefits may also be deducted as a business
expense. However, full tax advantages
are available only to groups that are
organized for charitable, scientific,
educational, religious, or literary purposes.
Limited Liability Company
Owners of a limited
liability company, or LLC, have limited
personal liability for business debts, and
the profit and loss of the company do not
have to be allocated acording to ownership
interest. The Internal Revenue Service
now allows an LLC a choice between being
taxed as a corporation or a partnership.
In Arizona, all incorporated
companies are registered with the State of
Arizona Division of Corporations. A
Registered Agent, many times one of the
corporate officers, is appointed by the
corporation to receive correspondence as well
as legal documents.
We can do the research to
help you determine the best type of legal
structure for your business. We will
make certain that the name you wish to use is
available with the Division of
Corporations. We will also prepare all
necessary documents and provide you with
stock certificates, as well as a corporate
book and seal, if required.
Please consult a Certified
Public Accountant or other tax
professional for information regarding
the tax benefits of each particular business
structure.
Attorney Services
If you are an attorney with
too much work, but you don't want to increase
your in-house work force, REH Paralegal
can ease the burden on your staff. We are
On-Line with Lex/Nex, Westlaw, Shepards, State
Links, etc. for legal research
