04/14/2021
Attorney
· Lawyer
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If you are thinking about starting a business in these very challenging times and not really sure of the advantages and disadvantages of creating one of the different types of entity selection available, we have some very good news for you. At Heekin Law, P.A. we help business owners in choosing the right type of business structure they will need to be successful. Business Law is an exacting field practiced by experienced attorneys not only familiar with the legalities involved but also the practical application of sound business principles which help to guide all businesses and their shareholders. The forming of a business usually starts with Entity Selection as in creating either a partnership, sole proprietorship, limited liability company (LLC), or a corporate entity like an S Corp all having unique strengths and weaknesses that need to be considered. At Heekin Law, P.A. our lead business law attorneys, Geoff Heekin and Ariel Spires believe the most appropriate way to determine which type of entity selection best fits a particular business model, should be based on a review of the business concept, understand the structure, organizational makeup, product, and goals set forth. Out of that entity selection would come the transactional contracts and agreements necessary to support a Partnerships, Corporation, shareholder agreements, memberships, employee contracts, and others needed at the start-up stage. But choosing the correct entity that best fits the business’s needs, is foundational for long-term success. Â
One of the most important considerations for a small business start-up is how will the taxes be paid by the business as well as the individuals who own the company. An S Corporation, or S Corp as it is commonly referred to, is a business set up as a corporation that has applied for an S Corporation tax status, nothing more. Though this type of corporate business entity does still offer business owners certain protections against personal liability and business debt it allows income generated by the business to not be taxed as a corporation. Instead, the income generated by the business passes through as income on the principal’s or shareholder’s personal income taxes. The actual purpose of the pass-through income is to avoid double taxation, once at the corporate level and corporate rate and then again reported as personal income on the individual’s tax returns. The distinct advantage for a small business electing S Corp status is that the proceeds of monies paid to the S Corp are added to any other income the individual(s), if filing jointly, might have realized during the taxable year. S Corp rules include that the business must operate and be based solely in the United States, shareholders must be US citizens or legal residents, only one class of stock can be issued and no more than 100 shareholders can own common stock issued by the S Corporation. S Corp’s are also restricted to individuals, human beings; partnerships or corporations or even non-residents cannot be shareholders. Only certain types of companies are eligible for S Corp status prohibiting financial businesses and businesses that gain the majority of their profits from international sources. The disadvantages are marginal for most small business startups, which by their nature usually have a limited number of shareholders who would invest. Additionally, since individual income from the S Corp is passed through to their personal tax returns, the added income could place the shareholder into a higher tax bracket, meaning they would pay more tax.
At Heekin Law, P.A. we do so much more than our name implies. Though we are well seasoned in settling business matters in a court of law, usually as a last resort, we also provide guidance on creating a business so that we can help limit a business’s exposure to possible legal entanglements down the road. Proper name selection on a state-by-state basis, registration of the business in the state you will be incorporating and applying with the IRS for an Employer Identification Number (EIN) to secure the proper licensing and permits if required to operate your business and pay taxes. We can also provide legal counsel on the one class of stock that can be issued to shareholders. At Heekin Law, P.A. our consultations are always free and we perform both transactional and litigation services for clients throughout Florida. Give us a call at 904-355-7000. Our commercial and business law legal practice also includes guidance on HOA and COA matters, real estate/landlord disputes, and all types of construction law matters. We have over 50 years of shared business law experience and assisting clients in bringing and defending legal actions in all local, state, and federal courts.
