b'Business ManagmentUnderstanding the Pros and Cons of Your Business StructureBy Brian OlesOles & AssociatesA n important decision for businessindividual level as opposed to the business level.Unlike a owners is choosing the type ofsole proprietorship, both entities require filing a separate business entity to operate as duringtax return in addition to an owner or shareholders personal the course of business. Each type oftax return.business structure has various pros andQualified Business Income Deduction for Pass Through cons in relation to organization andEntitiesbusiness operations.Sole Proprietorship A significant benefit of a pass-through entity like those described above is it allows the owners or shareholders A sole proprietorship is a popular choice for businesses duethe ability to take advantage of the new tax deduction for to the ease and low cost to set up.A sole proprietorshipqualifying businesses. This new deduction allows individuals is owned by one individual who is in charge of businesswho qualify to deduct up to twenty percent of qualifying operations and is not hindered by requirements to holdbusiness income in order to lower the individuals taxable annual meetings or consult with other individuals on theincome. The qualified business income deduction is not direction of the business. available for C-Corporations.Another benefit of a sole proprietorship is that there is not aC-Corporationseparate tax return to be filed. The profit or loss is reportedA C-Corporation is the most complex business structure on the owners individual return on a schedule C or E. Forwhich requires multiple documents to be filed with the legal and accounting purposes, there is no separationfederal and state governments in order to be granted between the business and the individual which coulda C-Corp status. Like LLCs, a C-Corp offers owners and present problems due to an accident or a loss. shareholders protection against losses and debt incurred The owner of a sole proprietorship has unlimited liability andby the business.is therefore responsible for all losses that may be incurredAn advantage of a C-Corp is the ease of generating by the business as a result of roofing accidents and lackcapital because it can issue various classes of stock offering of profit. The losses extend to the individual, which couldgreater control over ownership of the company. C-Corps result in loss of personal property to cover the loss. also benefit from a flat tax rate of twenty-one percent on Limited Liability Company (LLC) profits from the business. An LLC is a unique business structure because it can beA C-Corp has a perpetual existence which means it will exist taxed as either a partnership or an S-Corporation and itindefinitely regardless of if an owner or shareholder leaves provides protection for the business owner by limiting theor dies. This makes it easy to transfer ownership because liability to only the business which can protect them fromthe transfer is done through the exchange of stock.business losses. ConclusionAn LLC taxed as a partnership can prove beneficial forWhile each type of structure has pros and cons, an important growing businesses because there is an opportunity to haveaspect to consider is where the business is going in the multiple owners who can contribute capital to the business.future and how complex the owners need the business In a partnership, responsibilities can be shared which willstructure to be. For more information on which business alleviate the stress of one person trying to run the entireentity is right for you, feel free to reach out to our office business on their own. This also means that owners shareat (614)-487-0774 or visit us online at www.oles-cpa.com.gains and losses incurred in the business between each other regardless of who is responsible for them. About UsAn LLC taxed as an S-Corp allows a business to beOles and Associates is a mid-sized accounting firm located incorporated while still retaining the benefits of an LLC. Anin Columbus Ohio. We focus on helping individuals and S-Corp can be comprised of one shareholder or up to onebusinesses with their financial reporting, accounting, and hundred shareholders which could provide opportunities totax needs.generate additional capital to fund business operations. A shareholder can take distributions from the business which are not subject to tax. With an S-Corp, shareholders are taxed on their portion of profit or loss.Whether the LLC is taxed as a partnership or an S-Corp, both are considered pass-through entities. A pass-through entity is an entity where the profit or loss is taxed at the www.mrca.orgMidwest Roofer 43'