Choosing an Entity: Liability and Tax

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Presentation transcript:

Choosing an Entity: Liability and Tax Audio will begin automatically on the next slide.

Considerations to Choose Form Liability Tax Owner’s obligation to pay debts of company How the business income is taxed

Liability Full—personal responsibility Joint and Individual—each owner personally responsible Company X owes person C $100, but there is no money in Company X. Owners A and B are 100% liable to pay person C back. How will C get paid? Owner A or B can pay $100 and seek reimbursement from the other owner. Owners A and B can split the payment. Limited—responsible to the extent invested

Tax Pass through Double taxation Income taxed through personal tax return Double taxation First, income taxed at the entity level Second, leftover dollars distributed to owners are taxed through personal tax return