Forming A Business Entity

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What Is A Business Entity?

• A “Non-Real Person”• Legal entity• As an owner you act on behalf of

the business

Forming A Business Entity 2

Business Legal Structures & Name

• Determine your business’s legal structure:

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Sole Proprietorship

Partnership(many types)

Limited Liability(many types)

Corporation

Sole Proprietorships

• For profit business owned by one person– Easiest business to set up and operate– Profits are taxed once– Unlimited liabilities– Business ends at death of owner

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Partnerships

• A business owned by any two or more persons who contribute money, labor and skill to a business and share in profits, losses, and management– Profits are taxed once– Liability is shared among partners

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Corporations

• A business formed under state and federal law. It is treated legally as a taxable entity, distinct from the individuals who own it. –Most complex form of business to set up

and operate– Profits may be subjected to double

taxation– Owner/Officers have limited legal liability– Business continues after death of owner(s)

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Limited Liability Company (LLC)

• A hybrid business structure composed of aspects of a partnership and corporation.

• Owners are shielded from personal liability and profits and losses pass directly to the owners without taxation of the entity itself.– Moderately easy to set up and operate– Passed through taxation– Owner/Officers have limited legal liability– Business may choose to terminate upon death or

withdrawal of member (dependent on operating agreement)

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Federal, State, & Local Taxes

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Federal State County & City

Payroll taxes Sales & Use taxes Property Taxes

Income taxes Permits Permits

FICA Unemployment Insurance

Franchise Tax

Forming A Business Entity

Federal, State, & Local Resources

• Federal:– IRS– OSHA– Equal Employment Opportunity Commission

• State:– Comptroller’s Office– Secretary of State– Texas Workforce Commission

• Local:– San Antonio Economic Development Center– County Clerks Office

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