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Consider the advantages of incorporating!

Consider the advantages of incorporating!

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    Why  Inc  Slideshare Why Inc Slideshare Presentation Transcript

    • Why should you incorporate? Tax Strategy and Liability can be managed.
    • By continuing through the remainder of this primer on incorporation within the United States of America ( ) it is understood by you that this material is a starting point. If you elect to incorporate yourself please check with the relevant state’s Secretary of State department for additional information. Accordingly, it is also agreed that the responsibilities associated with incorporating lie solely on the business owner’s shoulders and therefore it is in the reader’s interest to research this topic fully before proceeding.
    • Most people start as a sole proprietor. They go to their town hall, apply for a business license, file a DBA with a newspaper service and they are off to the races! What are the Real Advantages to you as business person to incorporate? Sole Proprietor – standard start point
      • Consider the following advantages, to organizing as an LLC or a Corporation:
      • Tax Strategy – AVOID Higher Tax rates and other tax implications such as self employment taxes (approximately 15% of net income) result in a higher effective payout to the government, impacting how much you as well as working capital that is essential at the early stages for a business.
      • Insulate against LIABILITY – If anything goes wrong with your service or product, as a sole proprietor, ALL personal assets are vulnerable to litigation / lawsuits. Imagine running a successful business for many years then paying off your house, your cars, your boat perhaps that vacation home you always wanted. Your thriving business employs various employees and something (anything) goes wrong with a service or your product. The customer (or worse case customers) can file suit against you and EVERYTHING is now up for grabs.
      Sole Proprietor – standard start point
      • If Your Business has prospered and you consider partnering with another successful competitor. You want some protection just in case. Most people consider an LP, however, these don’t completely get the job either.
      • Tax Strategy – Higher Tax rates STILL apply and other tax implications such as self employment taxes (approximately 15% of net income) still apply.
      • Liability – If anything goes wrong with your service or product ALL personal assets are vulnerable to litigation / lawsuits, if you made the call/decision. The only protection an LP does offer is that it wards off liability incurred that stems from poor decisions / commitments made by your partner.
      • Still NOT the optimal solution from either a tax or protection perspective ...
      Limited Partnership – partial limited risk
      • An LLC offers the following advantages
      • Corporate Veil – full division of your personal and business assets exists. In the eyes of the government an LLC is a separate entity (almost like an individual) and therefore should anything go wrong with services or products, only those assets that belong to the entity are exposed .
      • Tax Strategy – an LLC is considered a pass-through entity, in that it avoids double taxation of profits – which is advantageous under most circumstances. However, in this regard, an LLC may be inferior to a Corporation as it is taxed by the IRS as a partnership – self employment taxes may still apply.
      • Flexibility in governance – the offsetting advantage, LLC vs. Corporation, that makes up for potential Tax Strategy disadvantages, is the flexibility in governance of the entity. To list a few of these items, voting ownership and economic ownership can be separated, board meetings and other compliance formalities are significantly less rigorous...
      LLC – Limited Liability Company
      • A Corporation offers the following advantages
      • Corporate Veil – full division of your personal and business assets exists. In the eyes of the government a Corporation is a separate entity (almost like an individual) and therefore should anything go wrong with services or products, only those assets that belong to the entity are exposed.
      • Tax Strategy – a C Corporation is directly taxed on its’ net income and should the Board of Directors decide to distribute the profits, shareholders are the additionally taxed on the dividend as well. However, depending on the tax brackets, if you work within the entity (how much you get paid) and net income levels achieved; C Corps can still offer a significant advantage in this regard.
      • Flexibility in governance – Corporations are rigorously run entities and require annual statements of information, board meetings (meeting minutes need to be archived and made available upon shareholder demand) and other compliance items. All told, the entrepreneur needs to consider these compliance items carefully!
      C Corporation
      • A “sub S” Corp offers the following advantages
      • Corporate Veil – full division of your personal and business assets exists. In the eyes of the government a Corporation is a separate entity (almost like an individual) and therefore should anything go wrong with services or products, only those assets that belong to the entity are exposed.
      • Tax Strategy – a Corporation that has elected “sub S” status now avoids both the double taxation associated with a C Corporation and the self employment taxes associated with an LLC.
      • Flexibility in governance – Much like Basic Corporations, “Sub S” Corps. are rigorously run entities and require annual statements of information, board meetings (meeting minutes need to be archived and made available upon shareholder demand) and other compliance items. All told, the entrepreneur needs to consider these compliance items carefully!
      C Corporation – Subchapter S election
      • LLC, C Corporation, “Sub S” Corporation
      • Corporate Veil – full division of your personal and business assets exists. all three entities provide ample protection in this regards as long as the veil is respected.
      • Tax Strategy – an optimal solution can be determined depending on your forecasted financial results, working capital requirements, and the degree of involvement of the owners –
      • Flexibility in governance – LLC are generally better in terms of flexibility and if that is the ultimate criteria then perhaps an LLC would suit perfectly. However, if you are a fastidious record keeper, and require less customization all three types of entities can offer substantial advantages.
      Summary
    • The Goal of this presentation is to offer insights about incorporation. If you are an MLM marketer, sole proprietor, mover and shaker or a captain on the high seas of business – managing risk should be at the forefront of your business map! the aLpha3 team would like to thank you for your time and wish you success in all of your endeavors! Thank you!
    • CONGRATULATIONS! From our first presentation on this topic, you have your official Articles, EIN, have filed your Statement of Information, have been assigned your State Employer ID and as needed have been assigned your Re-seller’s ID number. Perhaps you have elected to file a Sub chapter “s” election. From our second presentation you have a well thought out Operating / Member Agreement that covers you. Now you have again explored some of the true advantages of incorporating! Now to the task at hand making money! We at aLpha3 wish you success in your ventures and only the brightest of futures! Incorporate and Be Free