Choosing the Right Form of Business | Italian South Florida

Oct 2, 2011 by ClaudiaMoncarz

Perhaps you?re an Italian that would like to open a business here in the U.S., but you?re confused about what form of business to choose when you incorporate.? This is not uncommon.? Many entrepreneurs struggle with the uncertainty of not knowing which form of business, in terms of legal entities,? is right for their company.? The legal rhetoric surrounding the choice of the correct form of business is not generally very helpful either.

Many business owners set up their business incorrectly and then struggle later when they have to do it a second time, or they discover that their business is defunct because they didn?t comply with certain requirements that they were unaware of.

If you were to Google the term, ?US business structures,? you?d find an overwhelming listing of search results and a variety of legal business structures.? Then you?d be left trying to pick the correct form of business, or corporate structure, and that can definitely be daunting.

Here I?ve provided a brief summary of each legal business structure to assist you with your business planning.

• Sole Proprietorship (Similar to Singolo Impreditore).? The sole proprietorship is a fancy name for a single owner business entity. The administrative and formality requirements are minimal.? The sole proprietorship is not a separate legal entity from its owner.? In other words, the business owner has an unlimited personal liability for all the debts of the business.? Also, the life of the business is tied to the life of the business owner.? The sole proprietorship terminates when the business owner ceases to do business or upon his or her death.? From a tax perspective, this is the simplest form of business.? There is only one level of taxation with no additional tax filing requirements.

• ?Corporation (Similar to Societ? per Azioni). A corporation is the most familiar business structure.? It can have more than one owner and it is a separate legal entity.? In other words, it provides its owners with limited personal liability.? Also, the structure of a corporation allows for flexibility in the ownership through the issuance of different classes of shares.? On the other hand, the administrative and legal requirements of a corporation are numerous.? These requirements range from annual meetings with annual actions to annual filings with the division of corporation.? In addition, numerous formalities (such as the manner in which meeting are called) are required to be follow by law.? From a tax perspective, the traditional corporation, the C Corporation, has two levels of taxation; one at the corporate level on the profits generated by the company and another at the owner level when dividends are distributed.? This second level of taxation can sometimes be eliminated if the company elects to be treated as an S corporation.? Under this case, the income and expenses pass thru the corporation and are reported on the individual owners? annual income tax return.? However, this special tax treatment is limited to certain types and number of owners.? Unfortunately, non-US person do not qualify for this special treatment.? However, just because you are a foreign investor does not immediately disqualify your company for this special treatment.? This should be an option to explore.

• Partnership.? A partnership consists of a business established by two or more owners.? The two most common types of partnerships are general partnerships and limited partnerships. Just like a corporation, partnerships are separate legal entities.? However, this separate legal status does not immediately provide the partners with limited personal liability.? The limitation of the owner?s personal liability depends on the owner?s status in the partnership.? In a general partnership, all the partners are personally liable for the debts of the partnership.? In a limited partnership, only the limited partners are limited in their personal liability.? The administrative and legal requirements of a partnership are not as stringent as those of a corporation; however, they are greater than those of a sole proprietorship.? From a tax perspective, a partnership has one level of taxation.? The partnership itself is not subject to tax, but its partners are.? The income and expenses pass thru the partnership and are reported on the partners? annual income tax return.

• Limited Liability Company (Similar to Societ? a Responsabilit? Limitata). A limited liability company (LLC) is a hybrid of the partnership and the corporation.? It provides the business owners with characteristics of both of these business structures.? It can have one or more owners and it is a separate legal entity that provides limited liability to its owners.? For tax purposes, the LLC owner can decide how the LLC is taxed.? If it is a single member LLC, the single member can choose to be treated as a sole proprietorship or a corporation.? If it is a multi-member LLC, the members can decide whether the LLC is treated as a partnership or a corporation.? For the most part, the LLC will only have one level of taxation.? The income and expenses will pass thru the company and are reported by the owners in their individual income tax returns.

Each form of business has certain characteristics that make it ideal for your new company.? To determine which one is right for you, you have to look at certain factors, such as personal liability, taxation, legal administration, flexibility of the structure, number of owners in the business and level of complexity.

Claudia Moncarz, Esq. leads the Miami office and tax department for Tosolini, Lamura, Rasile & Toniutti, LLP.

Source: http://italiansouthflorida.com/2011/10/02/form-of-business/

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