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

Instructions and Help about How Form 2220 Entities

Hi my name is Keith Hall I'm a CPA and I work exclusively with small business owners just like you one of the key things you have to decide is what entity form do you want to operate as in your small business lots of options a sole proprietorship LLC partnership maybe even operate as a corporation there are certainly pros and cons of all of those but let's talk about being a sole proprietorship what are the benefits what are the detriments of that form of organization first of all operating as a sole proprietorship probably is the most common form for most new small businesses you came up with the idea you invested in it and you started the business and it's really just you in most cases operating as the sole proprietorship is going to meet most of your needs the great news is it is probably the easiest form of organization as well and also the cheapest there's no federal approval process there's no application process you don't have to file any forms to become a sole proprietorship in fact you don't even have to say it out loud you get your first client and you are a small business owner and a sole proprietor there's a couple of tax forms you need to know about if you are a sole proprietor the income and expenses that you incur in your business will be included on a Schedule C profit or loss for business that's also one of the key benefits of that form of organization and that is there's no separate tax return there's only a few more forms that go with your personal tax return you're going to have that Schedule C if you have at least 400 dollars of net income on that Schedule C you're also going to have a Schedule E you may have depreciation and a couple of other forms but the key benefit is no separate tax return that brings us to the second key benefit of operating as a sole proprietorship and that is the entity is not taxed separately from you its owner so you don't have to worry about another set of tax tables like perhaps a corporation does all of that tax is going to end up on your personal tax return that's another great benefit a couple of detriments of the sole proprietorship form it really just relates to just you if you have another partner your business is going to need another skill set from another individual if there are two of you or more clearly you can't then operate as a sole proprietorship maybe the biggest detriment of the sole proprietorship form of organization is the liability impact since there's no separate entity from you as the owner any liabilities that arise are also going to be subject to your personal assets so all of those type of things go together if you're operating in a industry perhaps so there's higher than normal liability the sole proprietorship form may not MIT you'll meet your needs keep in mind though that even though there are some liability issues that can't be handled with that entity form you certainly can address those with some type of insurance coverage a general umbrella liability coverage that can certainly help protect your personal assets from any type of liabilities as well but that gives you a couple of good things about the sole proprietorship a form a couple of bad things about the sole proprietor form the good news it is the easiest and the cheapest but it might also provide some higher than normal liability if your business tends to be a higher than normal liability so hopefully that gives you some good ideas of the pros and cons of a sole proprietorship and I hope that was 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 you you