Business entities. It’s a fancy way of talking about the types of companies that people can legally create in the United States. It sounds intimidating but it’s not, you just have to be careful about how you set them up and how you keep your records.
Don’t follow my bad example when it comes to business entities.
When I first got started in business I honestly didn’t know what I was doing. I simply needed to make some money to put food on the table.
But that can only be an excuse for so long. I wound up having to pay far too much taxes the first year my Podcast Production business took off and learned the hard what that I needed to get a new business entity set up, pronto.
Don’t be intimidated by the process. Determining and using the right business entity will yield great benefits.
On this episode I’m diving into my understanding of these things – and why they are important. It’s more than simply having an impressive name for your business.
There are legal protections that come with some of the types of companies you can create and there are tax benefits in some cases as well.
This episode tells you what I’ve learned, how it’s impacted me (positively and negatively) and why I think you’d be better off to make a decision about the type of business you’re going to have sooner rather than later.
I’m also very concerned that you not let the complications of this process deter you.
It takes some very specific, careful steps to set up any type of company in a way that is legal – except for a sole proprietor company, that happens by default the minute you start doing business… and I’d NEVER recommend that anyone stick with that business type for long.
But you CAN LEARN what it takes to set this up – you can get help from professionals if you need to. I just don’t want you to put it off because it sounds difficult.
I’m not going to fool you – some of it IS difficult, but it’s worth it.
And you can do it!
Keep in mind, I’m not a tax attorney or accountant, so my advice is just that, MY advice.
When it comes to making decisions about this kind of stuff, seek the advice of someone you trust who has gone through the educational steps needed to know what they’re talking about inside and out.
Summary of This Episode About: TYPES OF COMPANIES
- [0:39] Today we’re going to talk about the types of companies, or business entities you have at your disposal.
- [3:28] The type of company you choose impacts how the government taxes you.
- [7:30] Sole proprietor: taxes reported through your personal return, no legal protection.
- [9:27] My basic warnings about partnership: Draw up a partnership agreement.
- [11:35] The LLC: Limited Liability Company.
- [14:16] What is a corporation? Should you set up a C-Corp or S-Corp?
- [16:30] Why I decided that the type of company for me to use was an S-Corporation.
- [18:50] How distributions or dividends are given to members of an S-Corp (and how you pay less in tax because of it).
- [24:31] Don’t let the difficulty of learning deter you from doing the best thing.
- What the IRS says about LLCs (Limited Liability Company)
- Here’s what the IRS says about setting up a C-Corporation
- Guidelines from the IRS about setting up an S-Corporation
- Here’s a link to tell you how to apply for an EIN (employer identification number)
- Gusto Payroll & HR Services
- Mark J. Kohler Youtube Channel (an accountant I’ve learned a lot from)
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