By R.J. DeLuke<\/p>\n
Many things have to be included in a business
\nplan and one of them is how to establish themselves
\nto limit liability, at the same time having
\nthe right setup to reach their goals.<\/p>\n
There are various options in that regard, and
\ngetting professional advice can be important.
\n“A decision to form an LLC is complex,” said
\nDavid Kobylar, a partner with Hedley & Co. PLLC
\nin Clifton Park. “An LLC can be taxed in many
\nways.”<\/p>\n
James T. Towne Jr., a partner with the law firm
\nof Towne, Ryan & Partners PC, which has an office
\nin Saratoga Springs, said serious thought needs
\nto go into the process.<\/p>\n
One option is becoming an “S corporation”
\nwhich is a form that allows the protection of
\nlimited liability, but direct flow-through of profits
\nand losses, he said.<\/p>\n
S corporations and Limited Liability Corporations
\n(LLCs) have similarities. They offer their
\nowners limited liability protection. The LLC, as
\nan S corporation,can become a pass-through tax
\nentity. Pass-through taxation allows the income
\nor loss generated by the business to be reflected
\non the personal income tax return of the owners.
\nIt eliminates any possibility of double taxation for
\nS corporations and LLCs.
\n“You have individual protection so your personal
\nassets are not at risk,” said Towne.<\/p>\n
Limited Liability Partnerships can have a
\nsingle partner or more general partners and one or more limited partners. It is taxed as a partnership,
\nsaid Towne.<\/p>\n
LLP business people participate in management
\nand have liability for partnership obligations.
\nThey receive a share of the profits for their
\ninvolvement as limited partners.<\/p>\n
Deciding on a partnership agreement or shareholders
\nagreement is important, said Towne. It
\ndefines what the rights and responsibilities are
\nof the partnership.<\/p>\n
“Some don’t cross their Ts and dot their Is,” in
\nforming a partnership agreement. The specifics
\nhave to be looked at carefully. The issues involved
\nhave to be narrowed to enure they are appropriately
\naddressed.<\/p>\n
Another aspect of the S corporation is that it
\nhas no limit on its existence, while LLCs typically
\nhave limited life spans.
\n“An LLC is a good entity choice for most businesses
\nbecause they have the most flexibility from
\na tax standpoint,” said Kobylar. “They can elect to
\nbe taxed as they want.”<\/p>\n
Determining which entity is best for a business
\ndepends on specific considerations, including tax
\nconsequences, the nature of the business, management
\ncontrol, and other factors that apply to
\na particular business.<\/p>\n
Towne said insurance for each instance is also
\nimportant. “You want to know how much insurance is going
\nto make you comfortable,” he said. “No matter what entity you run your business as, you always have liability.”<\/p>\n
He said another consideration for the business
\nis “where is that entity going” in the future? “There
\nshould be some design. What’s your exit strategy?”
\n“You need to ask, ‘What is the end game for this
\nentity? … This also drives, in some ways, how you
\nare setting it up.”<\/p>\n
Kobylar agreed. “As the business grows and
\nthings change, it may make more sense to be
\ntaxed differently. You can change how you’re taxed
\nwithout changing your legal situation.”<\/p>\n
“It’s not an easy decision to figure what a client
\nshould be taxed as,” he noted. “What’s in the
\ncrystal ball? What’s in the future?”<\/p>\n
He said consultants need to consider issues
\nlike: Is it a fast-growth company; how many
\nemployees; what is the tax liability; does it take
\na while for cash to start flowing in or is it a cash
\ncow business?<\/p>\n
“As a company makes transitions over time, it’s
\neasier to change how you’re taxed,” Kobylar said.
\nAn LLC can also be easier to devise than a
\ncorporation. “Corporations have very stringent
\nlegal rules” that can be tedious and costly and
\nthat LLCs can avoid, he said.<\/p>\n","protected":false},"excerpt":{"rendered":"
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