Now that you have decided to start your own business, let us help you
get started in the right direction.  The following information is a short
summary of the various business structures you can choose from.

Choosing a Business Structure

There are various types of "Business Structures" to choose from when
you start your business.  Understanding each type of structure will help
you make the right decision for your business.

You can choose to begin as a "Sole Proprietorship" and change to
another business structure as your business grows.  

Before you decide on the name of your business, check with your state
corporation licensing office.  You can not incorporate a business name
if another corporation has already registered the name.  Even if you are
not planning to incorporate at first, this is a wise step to take in the
event you decide to incorporate later.  

Each business structure requires different tax reporting and state

Sole Proprietorship

As a sole proprietor you are the responsible party of your business.  
This business structure has the least restrictions than other types.  As
the owner, you assume full liability for all of the debt of your business.  

Your profit or loss is treated as personal income and is reported on
your 1040 Individual Income tax return using Schedule C.


A business that is owned by more than one individual or business is
considered a partnership.  

A partnership is required to file an annual information return, form 1065
Partnership return, with the Internal Revenue Service.  Partners are not
considered employees of the company.  The profit / loss passes to
each partner based on their percentage of ownership.  The income is
then reported on each partner's 1040 Individual Income Tax Return.

The partners share in the liabilities of the partnership based on their
percentage of ownership.

LLC - Limited Liability Company

An LLC is a business structure that is allowed by state statute.  When
choosing this business structure you file an application with the state.  

With this business structure, the business owner has limited liability
for the debts and actions of the company.  

Currently there is not an information return to be filed with the Internal
Revenue Service.  If the LLC is comprised of one owner, the profit / loss
passes to the individual's 1040 Individual Income Tax return using
Schedule C.  If the LLC is comprised of more than one owner, the
company must file form 1065 Partnership Return and the profit / loss
will then pass to the various owners.


To form a corporation, a business is required to file an application with
a state.  Annual reporting is required on form 1120 Corporation Tax
Return.  As a stand alone business structure, the corporation pays
taxes and distributes profits to shareholders.

With a corporation the business owners do not have any personal
liability for the business.  As a shareholder of the business, you the
business owner, will pay taxes on the shareholder distributions paid to
you.  Understand that this generates a double taxation situation.  The
corporation cannot expense the distribution and therefore pays taxes
on the distribution.  The distribution is considered taxable income to
the shareholder.

Corporate books are to be kept with annual meetings documented.  
Stock certificates can be issued to stockholders.
A Board of Directors and Officers are selected and documented.


Most small businesses choose to become an S-Corporation in order
to avoid the double taxation of a C-Corporation.  The business can be
owned by an individual or a group of up to 75 individuals.  

The S-Corporation is required to file an annual information return
1120-S S-Corporation Income Tax Return.  The profit / loss of the
business will flow to the individual 1040 Individual Income Tax return.  

Corporate books are to be kept with annual meetings documented.  
Stock certificates can be issued to stockholders.  A Board of Directors
and Officers are selected and documented.

The officers of the company usually have personal liability for the debts
of the company.  

Business License

Business licensing will vary state to state.  You are responsible to
check with your city, county / parish / borough, and state for licensing
requirements.  Even a home based business may require licensing.  
Always check before you get started.
Providing quality
professional services to
the small business owner
since 1991.  
Contact us:
King's Professional Services
Getting Started
1203 Askins Road, Hartsville, SC 29550
843.383.6763   /   866.383.6763
Getting Started Right