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The Structure of Your Business

The Structure of Your Business

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Published by: api-3764182 on Oct 18, 2008
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03/18/2014

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Sage

WHAT YOU
OUGHT TO
KNOW
ABOUT THE
STRUCTURE
OF YOUR

BUSINESS

Discover the Advantages and Disadvantages
of running your company as a Sole Proprietor,
General Partnership, Corporation or Limited
Liability Company

\u00a92005 Sage International, Inc.
International, Inc.

One of the biggest decisions you can make is to go into business for yourself. Whether you are opening an ice cream parlor, starting an internet based business, selling insurance, forming a down line, or investing in real estate, bottom line \u2013 you are a business owner.

Having a properly formed entity to serve as the foundation of your wealth building enterprise is essen- tial. Without it, you will pay more in taxes and expose your hard-earned assets to creditor attacks, the courts, the IRS, realistically anyone bent on serving you with a frivolous lawsuit. Through time and experience what most people come to know, is that they were always the one working so much harder to achieve their wealth building goals or worse they never reached them at all. The truth is it doesn\u2019t have to be that way.

So what stops a lot of people from moving forward in the most tax-efficient, lawsuit-preventative, financially tested, safe and secure way? Confusion! Should I form a corporation or an LLC? How about an S corp? How many entities should I form? That\u2019s why after so many years, working with so many clients, we have discovered the true advantages and disadvantages of each form of business ownership. We also know the importance of sharing this information with you today.

Of course, this still does not answer the question about which entity would work best for your particular situation. There is no silver bullet, no one perfect strategy that works for everyone. There is not one tool, one solution, one program that solves it all. Anyone telling you there is by selling \u201cit\u201d to you, is misleading and would appear to have only their best interest at heart \u2013 instead of yours. In fact, the only way anyone can help you find the fastest path you can take to achieve your own personal financial freedom is by listening to you. Finding out what it is you are trying to accomplish? What business are you in? What state are you doing it in? Do you have partners? And so on. Only then can specific action steps be developed.

Now you could certainly take this gift of information we have provided and decide to set up your own entity because you think it\u2019s going to cost you less. Of course, it won\u2019t. You won\u2019t have a clear idea of how this entity will work for you. You won\u2019t have a thorough understanding of everything you need to do to take advantage of all the tax benefits and asset protection strategies we use. You will have no support to help you keep your company in good standing. You will lose the benefit of working with a knowledgeable team of individuals who continually seek out new alliances, products, services, information and untapped resources across the nation. The fact is you can build up a nice set of assets or build a business quickly, but the

mindset and efforts to build and acquire is totally different than the mindset and efforts to keep,
maintain and protect your assets from The Flaming Arrows of Challenge.Let me ask you. Who are you
going to call to get your questions answered? Your Lawyer? Your CPA? Both of which charge you by the hour.
Who in your circle is going to teach you, \u201cWhat you don\u2019t know you need to know?\u201d

Sure you may think it will cost less initially, but in the long run, it will probably cost you everything you have worked so hard to achieve. Remember, this is your foundation! Everything else will build upon this along with the expectation that it will withstand the challenges every business owner must face. And I\u2019m going to say this bluntly. This is not where you need to be cheap. This is an absolute investment in your future, your family\u2019s future. Do it right \u2013 with the right people - right from the start!

Have you ever heard ofThe Prosperity Principle? You are prospered to the extent that, And in
the fashion that, You prosper others. Sage International, Inc. Believes it, Teaches it, and Demon-
strates it every day with our clients.We have a proven track record of turning budding entrepreneurs into

savvy, successful business owners. In fact, the relationship you develop with Sage is an opportunity to work with a team of very talented and educated individuals who will literally hold your hand through the entire process \u2013 before, during and after your entity is formed. Through a shared vision of results we look forward to traveling into the future with you, making sense of this epic journey you are about to undertake. Enjoy and Prosper!

The term \u201csole proprietorship\u201d means that the business is the same as its owner. The assets and liabilities of the business are one and the same as the owner. No entity is created; the business is destined to the same financial fate as the owner since they are one and the same.

Advantages

\u00b7 No entity filing requirements \u2013 business starts when the owner exercises initiative.
\u00b7 Simple to operate since the owner makes all of the decisions.
\u00b7 May register a trade name to promote its products and services.
\u00b7 Files one tax return \u2013 the owner reports and pays all taxes personally.

Disadvantages
\u00b7 Unlimited Liability \u2013 The owner is personally responsible for all business losses and must bear them to the full

extent of available personal resources. The proprietor is personally liable for all business debts.
\u00b7 No continuity of life \u2013 if the owner dies the business transfers to the heirs for continuation, restructuring or
closure. There may also be estate tax and probate consequences depending on how large the estate is.
\u00b7 Limited financing \u2013 personal contributions by the owner, bank loans (usually with personal assets pledged as
collateral) or other private sources.

\u00b7 IRS Audits - sole proprietors tend to have the poorest record keeping habits, often mixing business and
personal finances, which makes them a prime target for the IRS.

\u00b7 Converting to Corp or LLC \u2013 since the new entity will have a new taxpayer identification number (EIN) you get to set up your business all over again. Licenses, permits, bank accounts, accounting, payroll, vendor ac- counts, invoices etc. all need to be established under the new EIN and all documents, stationary, business cards, advertising, marketing, and logo must designate your new identifier which may be Inc. or LLC after the com- pany name.

Tax Implications
\u00b7 Business income and expenses are reported on a separate \u201cschedule\u201d attached to the sole proprietor\u2019s annual
Form 1040 individual tax return.
\u00b7 All of a sole proprietor\u2019s net profits are subject to \u201cself-employment\u201d tax (15.3% for Social Security and
Medicare). This is equivalent to the payroll tax for employees.
\u00b7 Required to make income tax payments, called \u201cestimated taxes,\u201d four times a year.
\u201cThe trick is to stop thinking of it as your money.\u201d - IRS Auditor
Sole Proprietorship

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