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Video instructions and help with filling out and completing Form 2220 Organizations

Instructions and Help about Form 2220 Organizations

Our second learning objective in session 1 are the forms of business organization what kind of business organization can I form if I decide to start a company what types of organization is owned by one person a single person simplest organization type to form and has unlimited liability this is the sole proprietorship and some of you may have started a business already where you were the sole proprietor and we'll talk about the types of liability affiliated we each the cost of each and so on to what type of organization has two or more people two or more owners and unlimited liability answer a partnership so you may have formed a partnership with a friend of yours or colleague of yours and third what type of organization is a legal person separate and distinct from its owners and has limited liability and this is a corporation so these are the three key types there are others and we'll go over one other variation of these here in a minute things to consider when forming an organization number one how much does it cost I've formed several corporations in my life and for as little as two hundred dollars went to an attorney downtown and was able to start a corporation to manage distressed real estate again these vary in the larger city may pay a little bit more what about the continuity how stable is the organization who controls the organization comes into consideration what is the personal liabilities a key consideration and how about tax ability or taxation of the organization's earnings how are they taxed and each of these are different in the sole proprietorship some of the advantages are very simple to form you can basically use your social security number and start a sole proprietorship and your income gets taxed along with your personal income not very regulated to get a business license go downtown and start your business income as I said is taxed as personal some of the disadvantages you have unlimited personal liability so if anything goes wrong in your corporation you can be sued or in your sorry self proprietorship you can be sued because you have unlimited liability limited lifespan amount of capital the amount of capital that can be put into the sole proprietorship is limited to your personal wealth so think about that if you decide to start a sole proprietorship in terms of a partnership you may gather a partner and say let's start a lemonade stand you may have done this when you're very very young general partnership these are the people running the organization all partners share in the gains and losses equally and all income is taxed as personal you have unlimited liability on the debts if you're a general partner if you're a limited partner in this partnership your liability is limited to the amount you've contributed to the organization some of the advantages of the partnership very simple to form once again you share the profits and your income is taxed as personal income disadvantages you still have unlimited liability if you're a general partner and limited life of the business the life of the business is limited to the life of the partners and a little bit difficult to transfer ownership on the on the partnership again you may have done this when you're young maybe creating a lemonade stand or a kool-aid stand maybe a lawn mowing or contracting business landscape contracting business you may have formed with a partner again our authors recommend that you get a written agreement a lot of times you'll do that just on a word or whim it's better if you write all this down a third type of business organization is a corporation which is a business separate and distinct it's really a legal person separate and distinct from its owners a corporation can borrow money buy property consume and be sued can own stock and other corporations so it's very much a legal person public ownership is one of the advantages you can sell stock in the corporation in this case a real key advantage is you have limited liability so these shareholders are not liable or on a personal basis you can protect your own personal assets by forming a corporation very easy to transfer ownership you can sell shares of stock and unlimited life of the business you hope it goes on forever some of the disadvantages you have strict regulation stricter regulation of corporation very sometimes expensive deform again I was very fortunate when we formed our corporation we were able to do it for just a few hundred dollars but you may find it a little bit more expensive than that these days that was ten years ago when I formed my corporation how do you do it essentially go see an attorney is recommended and the attorney will prepare for you a set of documents one of which is the Articles of Incorporation this will include the corporate name the intended life business purpose number of shares to be issued in my case the name of the company was like calm technologies to stand for light communications we made fiber optic attenuators our president like to call them fiber optic widgets because they were very complex to understand and basically they wanted to telecommunication networks and we were going to sell millions of them we wanted this business to go on forever and ten years ago it's after ten years it's still in operation eleven years later so it's that's a good thing corporate name like I'm technologies the owners were dr. J Patel president dr. song Musso vice president engineering Greg Pierce chief financial officer so these were all listed in the Articles of Incorporation aren't we intended it to go on forever the purpose was to make fiber-optic attenuators for use in telecommunications networks and the attorney at the time authorized ten.

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