Video instructions and help with filling out and completing Fill Form 2220 Entities

Instructions and Help about Fill Form 2220 Entities

Hey my name is Keith hole I'm a CPA and I work exclusively with small business owners just like you we spend a lot of time talking about lots of different issues but maybe the first thing you need to think about is what entity form are you going to operate under are you going to be a corporation an LLC a partnership maybe a sole proprietorship an important question so let's talk a little bit about being a corporation some pros and some cons now the corporation probably is the oldest form of organization the one that is most notable most recognized by people those are what you see on the New York Stock Exchange NYSC you see the little I NC after companies names General Motors American Airlines all of those companies are corporations so that may be a nice feel-good I don't want to put that as a pro or a con but is kind of the most recognizable entity now one of the main benefits of a corporation is protection of its shareholders from the liabilities of the company the corporation is a complete separate legal entity from its owners so the company has losses the company has an accident gets sued by someone the shareholders are protected from any of the assets of that corporation so the maximum amount of money a shareholder can lose is whatever they've invested in the company via their shares just like you would invest in American Airlines the most you can lose is the value of the stock so that's one of the main benefits of operating as a corporation another key benefit of operating as a corporation is kind of the intangible benefit of this prestigious form of organization people recognize the company as a bigger organization so from a marketing standpoint you might consider operating as a corporation just because it might make you seem bigger it might make you seem more powerful you might be able to market a cool corporate name rather than just like Keith's accounting service so the marketing implications of a corporation are one of the benefits of operating that way one of the key Tremont's of operating as a corporation is the potential for double taxation and maybe you've heard about that the reason you might have double taxation is since the C corporation the regular corporation is a separate legal entity from the owners it pays its own tax it's got to file a Form 1120 a big giant tax return and if it has income at the end of the year the corporation is going to pay tax on its own then someday hopefully when that corporation pays the money and dividends to you the shareholders you're going to pay tax on that money also so the corporation has pay tax on it and now you pay tax on the same dollars that's the double taxation of a corporation and that's the major major downside of the corporation form of organization now that can be somewhat managed with good tax planning if you're a corporation with just a few shareholders maybe just you and a co-worker someone who has formed this new idea with good tax planning you can have salaries or bonuses or other expenses from the corporation paid to you as salary you're still going to pay tax on that but now the corporation will pay tax on it also so you can manage the double taxation but that kind of brings you to another detriment of the corporate form of organization and it's a little bit more expensive if you're going to have this adequate tax planning you're going to have to have some tax types to manage that process so it can be a little more expensive similar to the LLC that we talked about the corporation is also formed with your state's Secretary of State you've got to file Articles of Incorporation there's going to be fees that go along with that and likewise you've got to maintain the paperwork you've got to have a board of directors you got to have set officers you got to maintain minutes of the shareholders and of the board of directors so you've got to maintain this corporate veil the structure of pay for work so a little bit more expensive a little bit more hoops to jump through if you will us a little more cumbersome in exchange for that liability protection and the marketing benefits that we talked about so hopefully that kind of helps you understand some of the benefits and some of the detriments of the corporate form of organization and I hope that's been helpful thanks for watching don't forget to check out the links above and the links below for more detail also make sure to rate comment and subscribe if there's something else you would like to see just let us know email us at request at Mahalo com you