Should your business be a proprietorship, corporation, partnership, or some other entity? Each form has advantages and disadvantages. Business situations change, and so do tax laws. This time of year may be a good time to review your business’s current structure to be sure it is still your best choice.

In proprietorships and partnerships, income and losses are reported on your personal tax return, and earnings are subject to self-employment tax. You are generally personally liable for business liabilities.

With a corporate structure, your liability is generally limited to corporate assets and amounts you guarantee. Minuses? Income is taxed twice — once at the corporate level and again when you receive dividends. Any salary you are paid is subject to employment taxes.

Small corporations can elect S corporation status. Generally, S corporations pay no federal income tax. The corporation’s income or loss is reported on the shareholders’ tax returns and is not subject to self-employment tax. However, if you are also an employee of the corporation, your wages are subject to employment taxes. An S corporation can provide you with limited liability. Another entity is the limited liability company (LLC), which offers the limited liability of a corporation and the tax treatment of a partnership. No one choice is best for every business.

It’s important to regularly evaluate whether it’s time for a change in your business form. Call us for guidance in your review.

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