Corporation Setup for Mexican Immigrants
There are seven entity structures to choose from when selecting on how to establish a business. The different structures determining the limitations and liabilities of the investors and business owners. Your accountant or attorney can help you decide what type of business structure best fits your needs.
For evaluation purposes, we have listed each one:
Sole Proprietorship
A sole proprietorship is common for individuals only, and is the one with the least amount of legal formalities. In a proprietorship, the owner assumes sole responsibility for the operations and finances of the business, including profit and loss. In the proprietorship form, the owner’s personal property is tied directly to the business; therefore, the owner assumes unlimited risk of his personal assets.
“C” Corporation
Corporations are a separate entity from individual ownership.
Corporations provide the shareholders with the most protection from liability and responsibility from debts and contracts.
Profits for a corporation are taxed at the corporate level when the income is earned and is also taxed at the individual shareholder level.
“S” Corporation
An “S” Corporation is similar to a corporation in that it provides its shareholders with protection from liability. However, unlike a corporation, an “S” corporation is exempt from federal income tax.
Instead the taxes are paid solely by the individual shareholders.
General Partnership
General Partnerships require an agreement between two or more individuals or entities to jointly own and operate a business.
Profit, loss and managerial duties are shared among the partners, and each partner is personally liable for partnership debts.
Partnerships do not pay tax, but must file an informational return, while individual partners report their share of profits and losses on their personal return.
Limited Partnership
A limited partnership is a form of business organization that offers some of the partner’s limited liability. It consists of a general partner who organizes and manages the partnership and its operations, and limited partners who contribute capital but have limited liability and assume no active role in day-to-day business affairs.
Limited Liability Partnership (LLP)
LLP’s are organized to protect individual partners from personal liability for the negligent acts of other partners or employees not under their direct control. Partners report their share of profits and losses on their personal tax returns.
Limited Liability Company (LLC)
A Limited Liability Company (LLC) is a combination of the corporate and partnership forms of business. In an LLC, parties control shares of the company and like corporations, their liability for the operations of the company is determined by their level of investment. However, like partnerships, income tax is not paid at the LLC level, but rather it is “passed through” and taxed at the shareholder level.
Some business entities are more complex than other and you should consult your accountant with what entity form best fits your needs and goals. Once that is determined, our office can help you completing the proper documents to get you started and legally establishing your business.
Another critical aspect to establishing a business is creating and gathering other required documents such as Corporation By-laws, Operation Agreements, Certificates of Formation, Employment Identification Number (EIN), and/or Tax ID numbers, and other business documents that we can assist with preparing.