Video instructions and help with filling out and completing Form 843 Insights

Instructions and Help about Form 843 Insights

Hi my name is Brett alter sure this week's topic is the formation of a company a lot of people think about going into business for themselves and they want to form some type of a legal entity suffer from themselves so they can operate their business and have certain benefits whether its tax or limited liability I'm going to discuss some of those today I'm discuss their advantages and their disadvantages some of the more common types are incorporation two of the most common types of corporations are C corporations and that is typically where the corporation is taxed for every dollar comes in at the corporate level and then if there's a distribution made to the shareholders that same dollar is text again at the shore holder level so a lot of people trying to avoid having a double taxation and they may want to form the second most common type which is an S corporation that is subchapter s of a certain tax code which is elected and must be followed strictly to be able to get that s subchapter status and that means that the corporation therefore would not be taxed twice it would have the benefit of just a single taxation of any money that comes in now the benefit of a corporation is that there's full liability coverage in other words the shareholders the officers the board of directors of the corporation cannot be sued personally for any debts that arise on behalf of the corporation they typically can also not be sued for any type of actions or omissions performed in their normal course of duties now gross negligence or an intentional will render certain individuals liability on behalf of the corporation but generally speaking the shareholders officers and board of directors have full limited liability the second most common type is a partnership this gives the benefit of a pass-through tax so there is not the double taxation that you see with the C corporation all money that comes in is taxed directly to the partners so the partnership itself is not taxed but they're typically needed to be at least one general partner on the hook for personal liability this made people shy away from partnerships and relatively recently a new entity has come forth the limited liability company which seemed to merge the benefits of both the corporation and the partnership a limited liability corporation or company gave the shareholders who are called members the board of directors and the officers full limited liability like a corporation but at all for tax purposes any money that was made in profits above expenses is taxed only once and that's directly to the members so you avoid the double taxation of a corporation but you're given the full limited liability of a corporation so that tends to be the most common type of company that's been formed these days the limited liability companies there are also nonprofits which can be created and there's a whole different set of rules for that once again it's about elekton the type of status it has to be a non-profit mean literally no profits are made directly to the shareholders of that company and the rules are pretty strict and if you're violating those rules you will lose that elected status of nonprofit and taxes will have to be paid in regards to the formation of the company regardless of whether you're going at the corporation a partnership a non-profit or a limited liability company the step is you know registering this company with the state of Michigan and we at all just legal services have a lot of experience preparing the necessary documents that need to be filed with the state of Michigan so that the company's plot property registered then beyond that you want to have a separate federal tax ID number set up for that corporation or company we recommend not using your social security number which can be done but the whole point of forming the separate company is to make it a fully separate entity from yourself so that in the event of any liability arising it only attaches to the company not to the owners or the employees of the company so we and all this legal services can prepare the necessary IRS tax forms to get a federal tax ID number for the company which can be used to open bank accounts and then the third part is the setting up of the company to be an actual separate entity that means using the federal tax ID number to go and get bank accounts making sure that insurance if necessary for the company is put in a company's name to make sure that utilities are set up if necessary to make sure that you work with vendors in the name of the company to make sure that all expenses are in the name of the company and then when you pay out those expenses you do it through a checking account or bank account that is set up in the company's name so and then when you have your customers make payments the payments come in in the name of the company so now you've established this money coming in in the name of the company money going out in the name of the company if you want to make a distribution to the owners me profits you could set that up in your documents which once again we at all just legal services are adaptive doing and then the profits go to the owners or the employees as a salary and by doing that you have established a good separate legal entity and you've created this limit of liability to the owners if you would like any additional information regarding this topic please contact our office if we offer a free consultation or visit our website thank you

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