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Understanding Your Business’ Tax Options

A business is defined by Wikipedia as a legal company or corporation organized for the purpose of conducting business affairs. A business can be for-purpose organizations or non-purpose organizations that function to meet a social cause or further a social objective. The word “business” can also apply to any number of aspects of business, including trading, investing, banking, insurance, communications, manufacturing, and marketing. In the United States, a business can be either a partnership (two or more people acting as one) or an independent firm.

Introduction

Profits are the main aspect of any business, even a small one such as a pub or restaurant. However, profit sharing is a more common business practice in the United Kingdom. This method of sharing profits between partners in a business can often be implemented with the aid of an accountant, attorney, business coach, or consultant. Here are some of the most popular methods of profit sharing:

Limited liability partnerships (LLPs) are a popular way to share profits among partners. An LLC is a limited liability company that allows its owners to separate their personal assets from the business assets. All the business partners usually receive equal shares of the business’s profits. With an LLP, a shareholder does not have to pay capital gains taxes on the transferred assets. In general, an LLP is preferred over a C corporation because the tax benefits associated with an LLP are more than the returns received from C corporations.

Company

Forming a limited liability company (LLC) can be done through different methods, such as by filing an application with the state business bureau, registering a corporation, or creating a partnership. Limited liability companies are very popular in the United Kingdom because it allows limited liability. This benefit allows owners to avoid paying taxes on the profits of the business even if they use it as a personal residence. It also allows owners to transfer their ownership and control to other people, thereby avoiding capital gains taxes. The use of an LLC business is popular in many countries around the world including the United States, Canada, and the United Kingdom.

Another popular method of profit sharing is through general partnerships. A general partnership is formed when two or more businesses to enter into a contract that promises them to make payments of their debts to each other over time. The debts of these businesses may be due to the same or different activities performed by them. Businesses may also receive partial payments for assets that they own or in the form of interest on loans they make. General partnerships are considered relatively easy to set up, though the partnership’s financial losses are limited to their partners’ share of the losses.

About

The main disadvantage of general partnerships is that the business debts of the partners are reduced if the partnership agrees to sell its assets to eliminate debt. General partnerships have less restrictions on the transfer of ownership and control than do limited partnerships. Limited partnerships must be liquidated and dissolution is triggered at the partner’s death, but limited partnerships can continue to exist for years, even decades, without being liquidated. Limited partnerships, however, are not considered banks, and the owner and his family are responsible for the business debts as if they had taken the partnership’s fees. An LLC business is an excellent choice for minimizing business debts. An LLC can carry an outstanding balance at zero percent interest for five years, and no tax on these earnings until the fifth year, at which point the company has paid taxes on its earnings.

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