Best Tax Structures for a Small Business

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Best Tax Structures for a Small Business
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Sole Proprietorship

• Benefits
• Simplicity Easiest and least expensive to set up
  and maintain.
• Control Full control over business decisions.
• Tax Filing Income and expenses are reported on
  the owner's personal tax return (Form 1040,
  Schedule C).

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Partnership

• Benefits
• Simplicity Relatively easy to set up.
• Tax Filing Income is passed through to partners
  and reported on their personal tax returns (Form
  1065).

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Limited Liability Company (LLC)

• Benefits
• Liability Protection Personal assets are
  generally protected.
• Flexibility Can choose to be taxed as a sole
  proprietor, partnership, S corporation, or C
  corporation.
• Pass-Through Taxation By default, profits and
  losses pass through to the owner's personal tax
  return, avoiding double taxation.

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S Corporation (S Corp)

• Benefits
• Tax Savings Profits and losses pass through to
  shareholders personal tax returns, avoiding
  double taxation.
• Salary and Dividends Can pay owners a salary
  (subject to payroll taxes) and the remaining
  profits as dividends, which are not subject to
  self-employment taxes.

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