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Easiest and least expensive to organize.
-
Sole proprietors are in complete control, may make
decisions as they see fit.
-
Sole proprietors receive all income generated by the
business to keep or reinvest.
-
Profits from the business flow-through directly to the
owner's personal tax return.
-
The business is easy to dissolve, if desired.
Disadvantages of a Sole Proprietorship
(reasons to form a computer consultant corporation)
-
Sole proprietors have unlimited liability and are
legally responsible for all debts against the business. Their business
and personal assets are at risk.
-
May be at a disadvantage in raising funds and are
often limited to using funds from personal savings or consumer loans.
-
May have a hard time attracting high-caliber
employees, or those that are motivated by the opportunity to own a
part of the business.
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Some employee benefits such as owner's medical
insurance premiums are not directly deductible from business income
(only partially deductible as an adjustment to income).
Computer Consultant Corporation
A corporation, chartered by the state in which it is
formed, is considered by law to be a unique entity, separate and apart
from those who own it. A corporation can be taxed; it can be sued; it can
enter into contractual agreements.
The owners of a corporation are its shareholders. The
corporation has a life of its own and does not dissolve when ownership
changes.
Advantages of a Computer Consultant Corporation
( reasons to form a computer consultant corporation)
-
Shareholders have limited liability for the
corporation's debts or judgments against the corporations.
-
Shareholders can only be held accountable for their
investment in stock of the company.
-
Corporations can raise additional funds through the
sale of stock.
-
A corporation may deduct the cost of benefits it
provides to officers and employees.
-
Can elect S corporation status if certain requirements
are met. This election enables a company to be taxed similar to a
partnership.
Disadvantages of a Computer Consultant Corporation
(reasons not to form a computer consultant corporation)
-
The process of incorporation requires more time and
money than other forms of organization.
-
Corporations are monitored by federal, state and some
local agencies, and as a result may have more paperwork to comply with
regulations.
-
Incorporating may result in higher overall taxes.
Dividends paid to shareholders are not deductible form business
income, thus this income can be taxed twice.
In this article, you've been introduced to
choosing a computer consultant corporation. To continue learning more
about running a computer consultant corporation, sign-up for the free
audio training seminar, 5 Easy Ways to Grow Your Computer Consulting
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