Whyte & Associates is truly here for businesses at every stage. Our Rancho Cucamonga, California team offers services to support our valuable business clients and fellow small business owners. These services include guidance on the incorporation process. Your organization’s future and financial health may hinge on how you incorporate. So, we are privileged to provide trusted insights into the types or ways to include and your most viable options for incorporation. From LLCs to S- and C-Corps, each can bring unique opportunities and potential minefields.
The “Limited Liability Company” is as its name suggests – as an owner, your liability for a business’s debts or other legal and financial responsibilities is “limited.” Plus, the profits and losses from the company may be parsed out to owners differently than the ownership interest allocation. For example, owners with a 10% interest rate could be granted 40% of the company’s profits. Owners also control how the LLC is taxed as a partnership or corporation.
Indeed, the upfront costs of forming an LLC are generally more than those of a sole proprietorship or partnership. However, our team of professionals and advisors always urges clients to take a longer, bigger-picture view and consider the value of forming an LLC. When juggling the long-term benefits, suddenly, the upfront costs can seem nominal or minimal in comparison.
Like an LLC, owners enjoy limited liability for debts/judgments against the business. Also, the net profits are shared among owners. The “share” is reported on your income tax. Likewise, all owners share in net losses. By reporting such a loss, you can offset other income on your taxes. This option, too, can be more costly, and the paperwork is more extensive. However, we partner with you to navigate these processes and remove some hassle and complexity.
With an S corporation, your income from the business’s profits is largely determined by your interest as an owner. However, remember that some benefits may only be germane to owners with at least a 2% stake in the corporation’s shares.
When your small business is incorporated, it is automatically deemed a “C-Corporation” or “regular” corporation. Some benefits may be deducted as a business expense. Likewise, you have limited liability for debts and other judgments. Like S-Corps, this option costs more and is more complex at the start than sole proprietorships, partnerships, or LLCs. As a separate tax entity, the corporation must pay its taxes. Your friends at Whyte & Associates help you avoid higher taxes by splitting the profits across the ownership group.
A blend of good accounting and the right incorporation strategy provides a sound foundation for your business. Call (909) 575-0080 with more questions and to schedule a consultation at our office in Rancho Cucamonga, California.
