Bookkeeping Company Explains Top 4 Types of Small Business

Your Bookkeeping Company

Your Bookkeeping Company – Small business is big business in the U.S. As of June of this year, Florida has 1,633,574 small businesses, with 444, 0666 of them having employees.

According to the Kauffman Index, the Miami-Fort Lauderdale area ranked 6^th in the nation for small business activity in 2015. To get even more specific, South Florida small businesses make up about 90% of the economy by many measures, including density, with close to 8,690 businesses for every 100,000 adults. Miami specifically ranks within the top 5 cities with highest rate of older adult business owners, ages 55 to 64, as well as the highest rate of young adult business owners, ages 20 to 34. And when it comes to startups, Miami ranks number two among startups.

If a small business is in your near future too, it’s important you understand the various business structures since they all have their own legal and tax implications. Your Bookkeeping Department in Miami is here to help you understand the differences between corporations, partnerships, proprietorships and other structures. Keep reading this small business blog so you can make an informed decision when setting up your own company. Should you need any advice or help setting up your small business, contact Manal Oliver at 305.868.7620. The Miami Beach bookkeeper work with many local businesses, especially law firms, dental offices and medical clinics, as well as with out-of-state companies thanks to outsourced bookkeeping.

What Is a Sole Proprietorship?

This type of small business is the most basic one to set up, where you’re the owner and responsible for all assets, liabilities and losses. Your company under a sole proprietorship is unincorporated, meaning there’s no distinction between you the individual and the business itself. As a sole proprietor, this Miami Beach bookkeeping company reminds you that you’re still paying taxes, however the business itself is not taxed separately.

The sole proprietorship income is your own income too, so you’ll pay federal taxes on that income. There are many advantages to this type of small business such as ease and least expensive to set up, complete control for the owner and simple tax forms. The major con however is that you can be personally held responsible for everything, including liabilities incurred by employees. A sole proprietorship works very well for freelance IT developers, marketing consultants, copywriters and the like.

What is a Corporation?

Also referred to as a C-Corp is an independent legal entity owned by shareholders. This Miami Beach bookkeeping company reminds you that that means it’s the corporation itself that is held legally liable for all activities, NOT the shareholders. So corporations are taxed on their profits, sometimes even taxes twice; at first when they turn a profit and then again when dividends are paid to shareholders on their own personal tax returns. However, corporations typically have a lower corporate tax rate than a personal income tax rate.

From a bookkeeping standpoint, if you set up your small business as a corporation, you’ll have to deal with more paperwork, tracking, recording and reporting. But don’t worry, this is where a company like Your Miami Beach Bookkeeping Department can help unburden you with those types of activities so you can focus on your business.

What Is a partnership?

This type of small business includes two or more partners in its ownership. Each partner contributes to all parts of the business including property, labor, capital, skill and so on. Your Miami Beach Bookkeeping company reminds you that all partners also share in profits and losses. You’ll have to register the business with the IRS in order to get a tax ID number and file an annual financial return to report income, deductions, gains and losses, but the business itself doesn’t pay income tax. Instead, partners include their respective share of partnership’s income or loss on their own personal tax returns.

What Is a Limited Liability Company?

Legally, a limited liability company is part corporation part partnership, in that you can take advantage of the limited liability of a corporation, but enjoy the tax efficiencies and operational flexibility of a partnership. The owners of this small business type of company are called members and there’s no limit to how many members a limited liability company can have. This Miami Beach bookkeeping company reminds you that Florida allows even one-member LLCs. An LLC isn’t taxed, instead all federal income taxes are passed onto the members and paid through their personal income tax. Since a limited liability company isn’t recognized as a separate tax entity, all LLCs have to file as a corporation, partnership or sole proprietorship tax return.

If you’re looking to file a small business, contact Your Miami Beach bookkeeping company for guidance.