Business Inception and Entity Selection

You decided to start a business in California and quickly find you must handle paperwork and tax issues: getting a local business license, acquiring a DBA to cash business checks, getting an Employer Identification Number (EIN) and unemployment insurance just to pay wages, protecting property with trademarks, acquiring specialized licenses (e.g. a contractor’s license for construction), learning Equal Opportunity and minimum wage laws, etc., etc., etc. plus Obamacare. Then you can think of bigger issues like entity selection. This affects how your taxes are paid, what forms you have to file, and how your business will be run—plus non-tax issues like liability and insurance.

• Sole proprietorships are the most simple type of entity because they are taxed through the individual taxpayer’s income tax return and are run by a single member or married couple. But even sole proprietors must calculate tips credits, depreciation, home office expenses etc.—and they must reconcile bookkeeping.
• For General Partnerships, Limited Partnerships, Limited Liability Partnerships, and Limited Liability Companies, profits and losses (and therefore, taxes) pass-through to the partners based on their proportionate ownership in the company
• S Corps limit liabilities for everyone but pay taxes like partnerships. Yet they provide opportunity to pay owners’ health insurance and perhaps reduce payroll taxes.
• C Corps differ in that they are taxed at the corporate and again at the shareholder level; small corporations can help owners take employee benefits and large corporations pay taxes for the privilege of maximizing size and capital.

Talk to us to figure out which structure is right for you. Dunham Associates CPAs weaves your business through this regulatory minefield so you can put your creativity to work.