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Show What is the best form of new business i f by sole proprietors. One is opening a separate business checking account at the bank. Never mix your personal and business transactions. trans-actions. Also, if your business is successful, success-ful, you may want to consider registering reg-istering the name with the state de partment of business regulations. This will protect you from someone some-one else coming in and capitalizing on the success that you have developed de-veloped with your business name. The filing fee for this is very nominal, nomin-al, and could save you a lot of trouble trou-ble later. As a sole proprietor, you are the business. The assets in the business busi-ness are yours and you are personally person-ally liable for all debts and obligations obliga-tions incurred by the business. There js no way to separate your personal assets from your business assets, and you are generally re quired to pledge personal assets as .ri collateral for business indebted-? ness. It is important to identify the business assets for tax purposes,; however. Business assets are sub- ject to personal property taxes and .-, O CONTINUED ON NEXT PAGE ! Editor's note: Bottom Line author Kenneth Ken-neth J. Rose is the owner of Rose and Associates, a small business tax consulting, consult-ing, and financial planning firm in Bountiful. By KENNETH J. ROSE Any time someone starts a new business, an important question that must be decided is what form of business to have. Sometimes the decision is made by default, but is it . the best form of business for you? Whether you are doing business as a sole proprietorship, a partnership, partner-ship, or a corporation, there are advantages and disadvantages to each, and unfortunately there are no clear-cut answers to which is best. This week and the next two articles will discuss these different forms of business. The sole proprietorship or sole owner is the simplest form of doing business. Any time a single individual indi-vidual decides to start his own business, he can start simply by opening his doors. There are no formal papers that need be completed com-pleted or filed to organize the business. busi-ness. To legally start the business, it is generally required to secure a business license. In Utah business licenses are issued by the city in which the business will be located. Other licenses may also be required re-quired depending on the nature of the business. These could be issued by the state or county. Examples Ex-amples of these would be professional profes-sional licenses, such as insurance or real estate, law, etc. or some issued by the departments of health for restaurants, beauty shops, etc. Some other things to consider in getting started are things that must be done regardless of the form of business, but are often overlooked u: Ken RoseBottom Line CONTINUED FROM PREVIOUS PAGE are also eligible for depreciation. Income in a sole proprietorship is easily reported for income tax purposes. It is done on Schedule C of the regular Form 1040 Income Tax form, but it is important to realize that the income reported is the net profits in the business, regardless re-gardless of how much you have taken out in draws for your personal person-al use. Net profits are also subject to Self Employment Taxes, the business owner's form of Social Security Taxes. There are some very distinct advantages to a sole proprietorship. proprietor-ship. The ease of organization is one. There are also some very distinct dis-tinct advantages taxwise to operating operat-ing as a sole proprietorship. One is the ability to hire your dependent children to work in the business. Their wages are exempt from social security taxes and yet they lower your net income so you don't have to pay as much in taxes yourself. You could also hire your spouse. Although her wages are subject to social security taxes as are other employees' wages, the matching portion is tax deductible to you and can lower your taxable t income. I Another advantage arises if you i have your office or principal place of business in your home. Part of j your home expenses will then be deductible, including home mort-gage'interest, mort-gage'interest, taxes, insurance, utilities, uti-lities, etc. Look at your situation carefully. If you are looking for the advantages advan-tages offered in being a sole proprietorship, prop-rietorship, this may be your answer. Get good advice if you aren't sure. It will save you a lot in the long run. |