Help With Insurance

An S-Corporation combines aspects of a C-Corporation with tax benefits of a partnership. S-Corporations were created to help encourage entrepreneurs to go ahead with their business ideas. It was founded on the idea that someone is more liable to start up a business if they know that they will not be held personally liable should the business fail and accumulate debt. They also will not be held liable personally should suit come against the company for other reasons. There are several restrictions to the rules of an S-Corporation, including but not limited to: 75 or less shareholders, all citizens must be legal citizens of the United States of America, and all shareholders must agree that the corporations should be an S-corporation.

•    Liability of an S-Corporation is structured like that of a C-Corporation. Shareholders cannot be held personally liable for the debt of the corporation or any damages caused by the corporation. This is a big draw for some businesses that wish to have limited liability and retain some of their income tax benefits.

•    Taxes are where the S-Corporation varies from the C-Corporation. An S-Corporation is a non taxable entity, which means that the profits of the business are only taxed one time before they are passed on to the shareholders. Shareholders must report any profits or losses on their personal income tax statements. This allows for startup corporations to set any losses against what shareholders might have invested in the company.

•    An S-Corporation holds perpetual existence, which means that unless it is dissolved or changed to a C-Corporation it will still be in existence. Shareholders can come and go and the business will still operate normally.

•    Control of an S-Corporation falls to that of the shareholders. Shareholders cannot be other partnerships or corporations. There are many rules and regulations to the control and running of an S-Corporation so many S-Corporations will become C-Corporations as they expand.

•    Profits are retained by the shareholders of the corporation. They receive the profits from the corporation and are required to report them on their personal tax return as in a partnership.
•    An S-Corporation can be formed in any state. The corporation will be required to abide by that states particular rules governing an S-Corporation. This may include taxation as well.

•    The convenience of an S-Corporation is that the liability falls to the corporation while the tax benefits are given to the shareholders. This is helpful for start up businesses that may have initial losses when first starting up a new business.

An S-Corporation can be a great way for a sole proprietor to move into a a different business model without taking on additional liability.

A Limited Partnership is a partnership that has at least one general partner and a limited partner. The general partners are involved in the day to day running of the business while a limited partner is usually not. Partnerships can usually handle a large number of limited partners due to the limited scope of their responsibility. The limited partner has made an investment in the partnership. This investment is usually monetary and allows the partner to get a vote in meetings as well as the right to be informed about any business transactions that may take place. A limited partner stays with the partnership even as general partners might change, enjoying perpetual existence.

• A limited partner is not held liable for any of the business transactions that take place in a partnership. They are not held accountable by law and will not lose personal property if the partnership they are affiliated with should find themselves in need of funds.

• A limited partner is responsible for reporting any of their profits or losses on their tax return. Whether it is another company that is the limited partner or if it is a personal tax return all income will need to be reported. Since a limited partnership is a non taxable entity the income is only taxed once before it reaches the limited partner.

• The Longevity of a limited partnership is ongoing. As long as there is still a partnership and there is at least one general partner then the limited partners will have perpetual existence.

• Control of limited partners is very limited. It can be limited by a contract or the general rules of a limited partnership. Most limited partners enjoy a vote at different business meetings and the right to vote out a general partner with a vast majority vote.

• The profits are split equally among partners, unless there is anything stipulating that they should be split differently.

• For the vast majority of limited partners, convenience is a key to success. They provide capital to a business and do not need to worry about the day to day operations of running that business. This can be a burden when and if the partnership is managed ineffectively, placing the limited partners funds in jeopardy.

Limited partnerships are usually formed when one partner does not want to have anything to do with the running of the business. They can also be formed when someone is in need of financial backing for a business idea.