Depending the type of business you are maintaining, you will have different types of taxes. Some forms of business can be more beneficial than others depending on the circumstances. It is important to be aware of all aspects of business formation before beginning your start up.
Types of Businesses
There are Partnerships, Sole Proprietorships, Limited Liability Companies, and more. Some businesses, such as those in the banking industry, trust, and insurance, are unable to form LLCs. Depending on the state in which you reside, there are different restraints in which you should look into if you are interested in creating an LLC.
Similar to a corporation, LLCs are business structures that have limited liability protection and pass-through taxation like a sole proprietorship or partnership. One of the benefits of LLCs are that they avoid double taxation. With an LLC, you are provided with more personal protection. More benefits include: income taxes not being paid at the corporate level, corporate income is allocated among the owners, and income taxes are only levied at the individual owners’ level.
There are a few requirements when filing to become an LLC. To start, You must choose a name that does not already exist, and it must end with “LLC”. Words that you cannot use are Bank, Insurance, Corporation, or other types of businesses prohibited by the state. Next, Articles of Organization must be filed. This is basic information given to the Secretary of State that gives them idea of what your business is going to be. Look into your state’s specific requirements before filing so you can ensure you meet all of them.
Often times, there is a filing fee. After this step, members need to clarify guidelines to avoid possible future issues, so an Operating Agreement must be created.
Lastly, before you open your doors, you must be sure to get licenses and permits. Before doing so, look into other state requirements, for example providing a printed notice in the newspaper letting people know you intend to start your LLC.
LLCs are beneficial in many ways and it might be wise to convert your business in order to avoid unnecessary taxes. It is the easiest way to protect your personal assets and it does not take much to convert your business to one. Limited liability means that owners are protected from personal liability when it comes to debts of the company. There are many great features that come along with LLCs and SoCo Tax and Cloud Accounting wants to make sure that eligible businesses are taking advantage of this.