SESSION FIVE: BUSINESS ORGANIZATION © 2011 My Own Business, Inc. All Rights Reserved entrepreneurcenter.mississippi.org Poll #1: (Harv: Please insert the first poll here.) • What is your current form of business organization? – – – – – – Sole proprietorship Partnership S Corporation C Corporation LLC I do not yet have a structure for my company © 2011 My Own Business, Inc. All Rights Reserved entrepreneurcenter.mississippi.org Principal Forms of Doing Business Sole Proprietorship • One person with unlimited liability. General Partnership • Unlimited liability for the debts of the business. Limited Partnership • General partners have unlimited liability but limited partner's exposure is limited to the contribution each has made. © 2011 My Own Business, Inc. All Rights Reserved entrepreneurcenter.mississippi.org Principal Forms of Doing Business Corporation • Provides limited liability for the investors. "S" Corporation • Treated as a partnership for tax purposes and as a regular corporation for other purposes. Limited Liability • Hybrid business form that combines the corporate characteristic of limited liability for owners with tax characteristics of a partnership © 2011 My Own Business, Inc. All Rights Reserved entrepreneurcenter.mississippi.org Poll #2: • The thing that worries me most about my business structure is: – – – – Likelihood of being sued Ability to pass the business on to my family Paying too much in taxes Not knowing who to turn to for answers © 2011 My Own Business, Inc. All Rights Reserved entrepreneurcenter.mississippi.org Filing Requirements Partnership & LLC Sole Proprietorship • Files Schedule C, Form 1040 • Files Form 1065 C Corporation S Corporation • Files Form 1120 • Files Form 1120S Basis Considerations Sole Proprietorship • N/A Partnership and LLC • Profits & losses affect partner’s basis • Partner’s basis is increased by share of p’ship liabilities C Corporation S Corporation • Shareholder’s basis is not affected by corporate profits & losses • Shareholder’s basis is increased by profits, decreased by losses, not affected by corporate liabilities Laws That May Affect You It is best to consult with professionals? • Filing Requirements © 2011 My Own Business, Inc. All Rights Reserved entrepreneurcenter.mississippi.org Laws That May Affect You It is best to consult with professionals? • Capital Formation © 2011 My Own Business, Inc. All Rights Reserved entrepreneurcenter.mississippi.org Laws That May Affect You It is best to consult with professionals? • Liability Considerations © 2011 My Own Business, Inc. All Rights Reserved entrepreneurcenter.mississippi.org Laws That May Affect You It is best to consult with professionals? • Taxation © 2011 My Own Business, Inc. All Rights Reserved entrepreneurcenter.mississippi.org Choice of Entity Chart © 2011 My Own Business, Inc. All Rights Reserved entrepreneurcenter.mississippi.org TOP TEN DO’S 1. Use a "For" and "Against" list when deciding about a partner. 2. Look for partner with complementary skills. 3. Have a buy‐sell agreement. 4. Consult a lawyer when deciding form of business. 5. Protect your intellectual property rights. 6. Outsource your payroll responsibilities. 7. Establish a tax deferred pension plan. 8. Collect referrals before retaining professionals. 9. Use your attorney to maintain compliance with labor laws. 10. Join a local service organization. © 2011 My Own Business, Inc. All Rights Reserved entrepreneurcenter.mississippi.org TOP TEN DON’TS 1. Don't use a general partnership to limit your liability. 2. Don't start a corporation without a attorney. 3. Don't sell stock in a corporation without an attorney. 4. Do not fail to pay payroll tax liabilities on time. 5. Do not sign a lease without your lawyer's advice. 6. Do not start your business without retaining an accountant. 7. Don't start a business with a handshake agreement. 8. Don't become a general partner without understanding unlimited liability. 9. Don't rely on a corporation as protection from personal liabilities. 10. Don't fail to take the advice of your lawyer seriously. © 2011 My Own Business, Inc. All Rights Reserved entrepreneurcenter.mississippi.org The Entrepreneur Center @ the Mississippi Development Authority 601. 359. 3593 entrepreneurcenter.mississippi.org © 2011 My Own Business, Inc. All Rights Reserved