Tampa Tax Attorneys Providing Clients With Choice of Entity Assistance

The “Choice of Entity” refers to the legal form a new business will take. Legal creations exist that allow a business to take on an existence apart from its owners, even though the owners still control the business – such legal creations have traditionally included corporations and partnerships, although there are numerous types of entities that may be selected, including sole proprietorships, limited partnerships, limited liability companies, and S corporations.

The initial considerations that a business must analyze before formation are: tax and tort liability issues, cost of maintenance of the entity, size and complexity of the entity, and local, state, and federal regulatory requirements.

The basic definitions of some of the different entities that may be chosen are:

• Sole proprietorship: This is someone who owns an unincorporated business by himself or herself.
• Partnership: This is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor, or skill and expects to share in the profits and losses of the business. Partnerships must file annual information returns to report income, deductions, gains, losses, and the like from its operations, but they do not pay income tax. The income passes through in profits or losses to the partners and the partners pay the income tax on their share of the profits on their personal income tax return.
• Corporations: In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation’s capital stock. A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. Corporations are also entitled to take special deductions. Corporations conduct business, realize net income or loss, pay taxes, and distribute profits to shareholders. From a tax perspective, there are two types of corporations; 1) C corporations, which are a tax paying entity and 2) S corporations, which are a flow through entity much like a partnership. Flow Through Entity means the shareholders pay tax on the profits not the corporation.
• Limited Liability Company (LLC): An LLC is a business structure permitted by state statute. They are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefits of pass-through taxation. In addition, an LLC can elect to be taxed as an S Corporation.

Persons seeking to choose a business entity for formation are encouraged to contact the knowledgeable tax attorneys at Yesner and Boss, P.L. for a consultation. Serving Tampa, St. Petersburg, Sarasota, Clearwater, New Tampa, and areas throughout Florida, Yesner and Boss is committed to providing their clients with the best possible counsel and advice with respect to business start-up and formation.