b'THE OFFICIAL NFBA MAGAZINEUNDERSTANDING THE PROS AND CONS OF YOUR BUSINESS STRUCTUREBUSINESS MANAGEMENTBY Brian OlesOles & AssociatesA n important decision for business ownersbusiness owner by limiting the is choosing the type of business entity toliability to only the business which operate as during the course of business.can protect them from business Each type of business structure has various proslosses.and cons in relation to organization and businessAn LLC taxed as a partnership can prove beneficial operations. forgrowingbusinessesbecausethereisan Sole Proprietorship opportunity to have multiple owners who can A sole proprietorship is a popular choice forcontribute capital to the business. In a partnership, businesses due to the ease and low cost to set up.responsibilities can be shared which will alleviate A sole proprietorship is owned by one individualthe stress of one person trying to run the entire who is in charge of business operations and is notbusiness on their own. This also means that hindered by requirements to hold annual meetingsowners share gains and losses incurred in the or consult with other individuals on the directionbusiness between each other regardless of who is of the business. responsible for them.Another benefit of a sole proprietorship is thatAn LLC taxed as an S-Corp allows a business to there is not a separate tax return to be filed.be incorporated while still retaining the benefits The profit or loss is reported on the ownersof an LLC. An S-Corp can be comprised of one individual return on a schedule C or E. For legalshareholder or up to one hundred shareholders and accounting purposes, there is no separationwhich could provide opportunities to generate between the business and the individual whichadditional capital to fund business operations. could present problems due to an accident or a loss. A shareholder can take distributions from the business which are not subject to tax. With an The owner of a sole proprietorship has unlimitedS-Corp, shareholders are taxed on their portion liability and is therefore responsible for all lossesof profit or loss.that may be incurred by the business as a resultWhether the LLC is taxed as a partnership or an of roofing accidents and lack of profit. The lossesS-Corp, both are considered pass-through entities. extend to the individual, which could result in lossA pass-through entity is an entity where the profit of personal property to cover the loss. or loss is taxed at the individual level as opposed Limited Liability Company (LLC) to the business level.Unlike a sole proprietorship, An LLC is a unique business structure becauseboth entities require filing a separate tax return it can be taxed as either a partnership or anin addition to an owner or shareholders personal S-Corporation and it provides protection for thetax return.28 / FRAME BUILDER -JAN2020'