Sole proprietors don’t require the approval of a director board or partner for any business-related decision. They can decide what happens to the business assets, hire and sack employees, and make all vital decisions. One report by Gallup shows that 57% of business owners work six or more days, averaging 55 hours a week. Raising money has a lot to do with what type of business structure you choose.
You might have heard of the term “double taxation” with regards to C-corps. This refers to the fact that C-corporations pay a corporate income tax and then shareholders have to also pay personal capital gains taxes on any dividends they receive from the company. An S-corp is a pass-through entity like a partnership, and isn’t subject to a corporate tax. Some corporations can avoid this double taxation of distributions by electing to be taxed as an S corp. Instead, the company’s profits pass through to the shareholders’ personal returns and each shareholder pays individual taxes on their portion. To be eligible for S corp. taxation, a corporation must have 100 or fewer shareholders and meet additional ownership requirements.
And if you need a powernap in the late morning or afternoon to boost creativity and productivity, you can take one. There are plenty of challenges that come with operating your own business. For many people, though, the rewards of running a business far outweigh the difficulties. In fact, 76% of those who decide to run their own small business are “somewhat happy” or “very happy” with their decision, according to a 2020 survey conducted by Guidant Financial’s Small Business Trends Alliance. Advising Small Businesses is a pragmatic, multivolume guide for small business practitioners and their attorneys.
Shareholders collectively own the business, but don’t directly engage in company decision-making. Instead, shareholders elect a board of directors to make major strategic decisions, such as whether to target a new audience or change a company-wide policy. The board appoints officers — such as the CEO, CTO and CMO — to run the organization on a day-to-day basis. Your choice between a partnership and corporation will affect your taxes, liability, access to capital and management structure.
Co-owners in an LLP are not personally responsible for the business’s debts. A corporation is owned by its shareholders and shareholders make a contribution to the corporation for shares of ownership. Shares authorized are the maximum number you are issued to sell. The number advantages of owning a corporation of authorized shares is stated in the company’s articles of incorporation. There may be additional paperwork required for certain types of corporations, such as public benefit corporations needing to undergo a verification process and file annual benefit reports.
For example, if a client gets injured on business property, they can lay claim to the business assets and the owners’ personal assets as payment for their injuries. The legal and tax structure of your corporation can have a major impact on the way you run your business and the taxes you’ll pay. Consult with a business lawyer and/or certified public accountant (CPA) before you make any final decisions.
Some may ask for yearly reports, require you to issue shares and hold yearly meetings as well as keep accurate and complete records, written communications, financial statements and meeting minutes. Check with your state or consult with a lawyer for more information regarding the specific requirements to remain compliant. Once your corporation has been officially formed and bylaws have been drafted, hold a meeting of the initial board of directors. Minutes of all board meetings should be recorded and kept with the corporation’s records.
This means that the owners cannot be held responsible for the debts of the corporation. It also means that the corporation can own assets, sue or be sued, and borrow money. For their owners, both a limited liability company (LLC) and a corporation offer similar legal advantages. A primary advantage is that shareholders cannot be held personally liable for the debts of either entity.
If you want to become an entrepreneur, there’s nothing really holding you back. Have the power and flexibility to donate time or money to worthy causes. Check out the first referral platform for independent business attorneys. Kelly Main is a Marketing Editor and Writer specializing in digital marketing, online advertising and web design and development. Before joining the team, she was a Content Producer at Fit Small Business where she served as an editor and strategist covering small business marketing content. She is a former Google Tech Entrepreneur and she holds an MSc in International Marketing from Edinburgh Napier University.
One of the main reasons why is lacking the ability to endure dips in the business. Often, due to circumstances and factors outside of your control (like a global pandemic, for example), small business owners are faced with what feels like a rollercoaster of success and trials. As an employee at a large business, there are often strict corporate guidelines limiting the amount of control you have over your goals and advancement opportunities within the company. At small companies, you’re less likely to get bogged down by the complexity of corporate structure.