The term “business entity” describes any organization formed to conduct business. Most businesses operate under one of four primary business structures: sole proprietorships, partnerships, corporations or limited liability companies (LLCs). At PRIME, we always recommend setting up an LLC when you are just getting started.
Forming an LLC not only legalizes the business, but also creates separation and protection from your personal life. This is commonly referred to as the “corporate veil of protection.” The LLC separates and protects you and all of your personal assets from any type of liability associated with the business. In simplest terms, you can’t be sued personally for something that happens with the business. Forming an LLC also opens the door to more than 250 tax deductions and allows you to write-off any investments made for the business. This means you have the potential to save THOUSANDS in taxes and keep more of the hard-earned money you make!
The moment you start to pursue something and have formally made an intent to be a business owner! You don’t have to make an income to form an LLC.
We don’t recommend it. A proper LLC setup should include an operating agreement, which we recommend be drafted by a legal team that understands entity creation. The operating agreement is the legal structure of the LLC and should be drafted specifically for your business and industry. The operating agreement is also how you obtain your legal tax status. This is important because not all industries are taxed the same.
PRIME offers a one hour complimentary business consultation to assess your unique situation. Our team will handle all LLC setup, draft an operating agreement and ensure your business is structured the correct way without charging you attorney fees! In addition, PRIME offers lifelong email and phone support for your LLC. Every customer is assigned a corporate advisor to lead them every step of the way.
When setting up an LLC, you must designate a physical headquarters for the business. PRIME always recommends using the registered agent address in your state for the sake of privacy, rather than your home address. You can still receive mail, bank/credit card statements, vehicle registration and other utilities at your home. This is just the address listed on the public record.
If you already have an LLC, PRIME recommends you schedule a complimentary business assessment to ensure it is still active and functioning correctly for your business.
(i.e. LLC, Corporation, partnership, etc.)
When it comes to choosing an entity for your business, we recommend a Limited Liability Company (LLC). An LLC is a hybrid entity that combines the limited liability of a corporation with the flexibility and tax advantages of a partnership.
One of the key benefits of forming an LLC is that it provides personal liability protection to the owners. This means that the member’s personal assets are typically protected from any business debts or legal liabilities.
From a tax perspective, LLCs are considered pass-through entities, which means the business itself does not pay federal income taxes. Instead, the profits and losses of the business are passed through to the individual members, who report them on their personal tax returns. This can result in significant tax savings, compared to a corporation, which is subject to double taxation.
An LLC is considered a better option than a sole proprietorship because it provides personal liability protection to its members, meaning their personal assets are protected from business-related debts and legal liabilities.
This is in contrast to a sole proprietorship, where the owner is personally responsible for all business debts and legal liabilities.
Overall, an LLC can provide greater protection, flexibility, and tax advantages.
One of the key tax benefits of an LLC is that it is considered a pass-through entity for tax purposes, which means that the business itself is not taxed on its profits or losses. Instead, the profits and losses of the LLC are passed through to its members, who report them on their personal tax returns.
This can result in significant tax savings, as LLC members may be able to take advantage of deductions and credits that are not available to corporations.
Additionally, LLCs have flexibility in terms of how they are taxed and can elect to be taxed as an S-Corporation or C-Corporation, depending on their specific needs.
The legal requirements for forming an entity vary by state and depend on the type of entity being formed. In general, the process involves selecting a business name, filing formation documents with the state, obtaining necessary permits or licenses, and fulfilling other state-specific requirements.
It’s important to research and understand the specific requirements for forming an entity in your state.
The form an LLC, the specific documents required can vary depending on the state where it is being formed. It’s important to research and understand the requirements in your state. In general, the following documents are typically required:
Articles of Organization: This is the document that establishes the LLC and provides basic information about the business, such as its name, address, and the names and addresses of its members or managers.
Operating Agreement: While not always required by law, an operating agreement is a critical document that outlines the ownership structure, management, and operations of the LLC.
Employer Identification Number (EIN): An EIN is a unique identifier for tax purposes and is required for most LLCs that have employees or plan to hire employees. It is often required to open a business bank account.
Business Licenses and Permits: Depending on the type of business and the state where it is being formed, certain licenses and permits may be required to operate legally.
Yes, it is possible for non-U.S. citizens or non-residents to form an entity in the United States. However, the process and requirements may be different than for U.S. citizens and residents. It’s important to consult with an attorney or tax professional familiar with the process.
PRIME can help international customers open an entity in the U.S. but we do not offer services to international clients, seeking to open entity in a foreign country, due to varying tax laws and governing circumstances.
A tax deduction lowers your taxable income and reduces your tax liability. You subtract the amount of the tax deduction from your income, making your taxable income lower. Once you have an LLC formed, you become eligible for more than 250 tax deductions. Every business is different but common deductions include your internet bills, phone bills, a portion of your rent/mortgage, vehicle mileage, gas, home office equipment and so much more! You can apply all deductions against your overall gross taxable income, including your personal income. PRIME’s team of tax experts can help you understand how deductions work and save you thousands of dollars come tax time, ensuring you keep more of the hard-earned money you make. We always recommend you track your expenses and hire a professional to do your taxes.
Yes! With the LLC put in place and legal tax status defined in your operating agreement, your initial investment is now 100% tax deductible as a legal business startup expense. Our corporate advisors will help you understand how any initial investments made with PRIME, or any other training and education programs, can also be written off.
Your business tax classification, also known as your entity type, determines how your business is taxed and what tax forms you need to file.
The most common business tax classifications are sole proprietorship, partnership, LLC, S-Corporation, and C-Corporation. The classification of your business is determined by several factors, including the number of owners, the liability protection you want, and how you want your business income to be taxed.
Schedule a complimentary business consultation with PRIME to see what type of entity is the best for your business.
For most businesses, the deadline for filing income tax returns is March 15th of the following year.
However, if your business operates on a calendar year basis, the deadline is April 15th.
It is important to note that these deadlines can vary depending on your state and any extensions you may have applied for.
For most businesses, the deadline to file for an extension is March 15th or April 15th, depending on the tax year.
The extension will give you an additional six months to file your tax return, making the final deadline September 15th or October 15th.
The forms you need to file for your business taxes will depend on the type of entity you have and your tax situation. Some of the most common forms for business taxes include Form 1120S for S-Corporations, Form 1065 for partnerships and LLCs taxed as partnerships and Schedule C for sole proprietorships. Additionally, your business may be required to file other forms such as Form 940 for unemployment taxes, Form 941 for payroll taxes and Form 1099-MISC for reporting payments made to contracts.
Schedule a complimentary call with PRIME if you need help from a tax professional to ensure that you are filing all the necessary forms for your business taxes.
Common deductions include expenses for home office deductions, business travel and meals, internet and phone bills and health insurance premiums. Additionally, self-employed individuals can deduct contributions to retirement plans and health savings accounts.
Some common credits include the Earned Income Tax Credit and the Child and Dependent Care Credit.
Schedule a complimentary call with PRIME to ensure you are taking advantage of all the deductions and credits available to you as a business owner, as eligibility and requirements can vary based on the type of entity and industry you are in.
If you fail to file your tax return or pay your taxes by the deadline, you may be subject to penalties and interest charges. These penalties can add up quickly and can result in substantial amounts owed to the IRS or state tax agency. In some cases, failure to pay or file taxes can even lead to legal action.
If your business is selected for an IRS audit, the agency will typically notify you via mail and provide you with information on the specific items they want to review. During the audit, the IRS will review your financial records, receipts, and other documentation to ensure that your tax return was accurate and that you have paid the appropriate amount of tax.
To prepare for an audit, it is essential to maintain accurate financial records and to keep copies of all receipts and documentation related to your business expenses. We recommend doing this electronically through apps like QuickBooks.
Without an estate plan, everything you have worked hard to build, earn and save could be at risk. PRIME offers a comprehensive estate plan to protect your assets and your family. Without all four components, you could be at risk. 1) Will – Legal document that allows you to designate beneficiaries and administrators and to avoid default probate laws 2) Living Will – The document legally communicates your desires in case of a life or death situation where artificial life support is needed. 3) Trust – A document that allows you to avoid the cost and expense of probate. 4) Power of Attorney – Legal authorization that gives a designated person the power to act for another person when aging and illnesses may prevent them from doing it themselves.
An estate plan is a legal document that outlines how you want your assets to be distributed after your death. It can also include instructions for how you want to be taken care of in the event you become incapacitated.
Everyone can benefit from having an estate plan, especially if you own property or have children. It ensures that your assets go where you want them to go, rather than being distributed according to state law. It can also minimize taxes and fees associated with transferring your assets.
A will is a legal document that outlines how you want your assets to be distributed after your death. It can also include instructions for how you want to be taken care of in the event you become incapacitated.
A power of attorney is a legal document that grants someone else the authority to make decisions on your behalf, such as managing your finances or making healthcare decisions, if you become incapacitated.
An advance healthcare directive is a legal document that outlines your wishes for medical treatment in the event you become unable to make decisions for yourself.
A trust is a document that allows you to avoid probate, reduce estate taxes and provide for minor children and other dependents.
You should update your estate plan any time you experience a major life change, such as getting married, having children or acquiring significant assets.
Aside from that, we recommend reviewing it every five years to ensure it’s up to date.
Business credit is a company’s ability to buy something now and pay for it later. By establishing a good business credit rating, it’s easier to borrow money when your company needs it. It’s important to note there is a difference between personal credit and business credit. Most entrepreneurs starting out have little or nothing to fund their business. It’s common for entrepreneurs to use personal credit to fund their business but unfortunately, that’s how most businesses fail. So how do you build business credit? Schedule a complimentary business assessment with PRIME to learn more about our Corporate Financial Program and how we can help fund your business!
Some of the factors that impact your business credit score include payment history, credit utilization, length of credit history and public records, such as bankruptcies or liens.
You can check your business credit score through a credit reporting agency, such as Dun & Bradstreet or Experian. Some of these agencies offer free credit monitoring services or credit reports with a paid subscription.
Some things you can do to improve your business credit score include making timely payments on your credit accounts, maintaining a long credit history and disputing any errors on your credit report.
It’s important to keep your personal credit and business credit separate to avoid any negative impact to your FICO score and your business.
Business credit scores typically range from 1 to 100. We recommend obtaining an 85 or higher, however, the threshold for a “good” score can vary depending on the lender or credit provider.
If you need help developing business credit or improving your score, schedule a complimentary consultation with PRIME.