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For The Utah Contractor S Corporation? LLC? Sole Proprietorship? Corporation One of the big drawbacks of a C corporation is that it is double taxed, i.e., the profits of the corporation are taxed, and then after the profits are distributed to you as a shareholder, they are taxed again. That hurts. Some owners get around paying all or most of the profits to themselves as salaries. If the salaries are reasonable, that is legal, but that is a red flag that the IRS looks at very closely. S Corporation An S-Corporation is a corporation, which makes an election to be taxed not as a separate entity, but as a “pass-through” entity where the profits and losses are passed through directly to the shareholders. This eliminates the double taxation problem associated with C corporations. In general, a corporation that meets each of the following criteria may elect to be taxed as an S Corporation. It has not more than 75 shareholders Its only shareholders are individuals, estates and certain trusts It has no nonresident alien shareholders It has only one class of stock issued to shareholders Each of its stockholders consents to become an S corporation. The limited liability involved is very similar to the L.L.C. whereas you obtain the “Corporate Veil” of personal protection and you have no personal liability for company debts. People can sue the business, but the cannot sue you, the officer/owner. That means that if the business fails, you can still keep your home and personal possessions. Limited Liability Company For many small businesses this is a good type, particularly for those who want personal protection but dislike complications. Like a corporation, the owners of a limited liability company have no personal liability for company debts. People can sue the business, but they can't sue you as the owner. That means that even if a business fails, the owners can still keep their homes and personal assets. There a few formalities required and owners pretty much run the company as they choose. The simplicity and flexibility of the LLC makes it very easy to manage. Sole Proprietorship This is the simplest and most used of all business entities. It is run as the owner wants to run it. The major disadvantage is that since the business and the owner are one and the same, a lawsuit against the business imposes total liability on the owner. Also, a sole proprietor is personally liable for the acts of their employees. A large lawsuit would probably cause the owner to lose not only their business, but likely all of their personal assets as well, including their home, personal vehicles, and all other belongings. And a sole-proprietor usually pays more in taxes, since they have none of the tax saving advantages that could be available to them if they were to use another type of business entity. Partnership This is a commonly used business entity. It is also the most dangerous, because you are not only liable for your own mistakes, you are also liable for your partner's mistakes. There are no formal requirements imposed upon it, and it is run pretty much as the partners want to run it. Although this is a very common business entity, from a liability standpoint it is the worst. Limited Partnership In this type of business entity, there is one or more limited partners who invest money or property in the partnership. One or more general partners actually run the business. A certificate of limited partnership must be filed with the State, and few state restrictions are placed on how the business can be run. The general partner has complete control, and complete personal liability. A limited partner has no liability for any of the acts of the partnership, and can't lose more that the amounts they have invested in the partnership. However, a limited partner is not able to participate in the control of the partnership. They are more or less at the mercy of the general partner. COMPARISON CHART OF TYPES OF BUSINESS ENTITIES
*Limited Partnership Still Not Sure Which Setup Is Right For You? If the above is confusing, which it can very well be, you may need the advice of an attorney who specializes in the area of business law. In order to get more information on low-cost, even free legal advice, Click here. So, I bet you are wondering, what's your next step, huh...glad you asked...Click here. | Classifications | Do You Qualify? | Licensing Fees | Legal Help | | Who We Are | Contact CLS | Email CLS | Payment Policy | © COPYRIGHT 2004-2006 ALL RIGHTS RESERVED CLSOFUTAH.COM |
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