With a sole proprietorship, you have full control of your business, even more control compared to the partnerships and corporation business structures. In many cases, the owner of a small business will opt to start out using a proprietorship. The owner will probably look at a corporation, forming a partnership or even a Single Member Limited Liability Company (or sole LLC) as the business grows.

What Is A Sole Proprietorship And What Can It Do For You?
This is the most popular and easiest type of business to create. Just like the name indicates, a sole proprietorship has just one owner who is responsible for the operation, earnings and obligations of the business. All earnings and profits go to the sole owner. On the other hand, financial obligations, including debts, are likewise the responsibility of that single owner. Strengths and weaknesses include:

•    A sole proprietorship is straightforward to register and is usually the simplest to launch. Based on the particulars of the business, launching this kind of business needs to have only a small amount of operating capital.

•    Given that the business is made up of a single owner/operator, that individual has the benefit of making every business decision. The owner has total control. Conversely, if that individual gets sick or is somehow not physically available, the business will be affected, which then will put earnings at serious risk.
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•    Even though the owner gets all the profits, that individual is also fully liable for all financial obligations and business responsibilities. Therefore, the personal assets of the owner are susceptible to claims. By law, that individual is fully responsible for business actions; therefore, that individual might additionally be found legally responsible for mistakes and misconduct in the business operations. In addition, even though the regulatory factors are usually relaxed, income taxes are calculated on the personal amount, and when income increases, the tax percentage will too.

Please let us know how we can help you with a referral or introduction to this professional or other similar ones.  Contact us at 305-548-5020 or email us at fd@molawoffice.com. 

This is a post by the Law Office of Yoel Molina, P.A.  A law office based in Miami, Fla. We focus on business, corporate and civil litigation matters.  Our services are available to clients based in Miami, Ft. Myers, Naples, Orlando, Tampa, Ft. Lauderdale,  Jacksonville, Palm Beach, Mexico, Argentina, Chile, Colombia, Panama, Russia, Ukraine, India, Turkey and beyond.  Call 305-548-5020 or email us at fd@molawoffice.com for more information. ​

​A Sole Proprietorship is a business that is run by only one person. Most states do not require a sole proprietorship register the same way as a corporation or a limited liability company, often called an LLC. Check with your state to find out what your responsibilities are.  Without a doubt, it is the easiest form of business to set up and operate.  Some sole proprietorship owners will apply for a separate tax ID but most use their personal social security number.  What you might not know, you are required to register your business, will be responsible for all taxes for the business, and must apply for a license, and other permits if applicable.  Let's break down a Sole Proprietorship and what you need to know:

​Starting A Sole Proprietorship & What You Need To Know:
 
Because some states do have laws in which a sole proprietorship must be registered and have a license to operate, always check ahead of time.  You will have to acquire all required permits in order to operate. It's important to understand that you should not use your business as a tax shelter or other escape clause for your profits.  The profits made from your business will be viewed as income that must be claimed on your personal tax returns. 
 
The Disadvantages Of A Sole  Proprietorship:
 
Unlike a Corporation or a Limited Liability business, you will not reap the benefits they enjoy.  Although a sole proprietorship is the easiest to set up, keep in mind, any debts your business incurs, you will have to pay.  If you don't, creditors can come after you and seize your personal assets if you cannot afford to pay them off.  If you get into trouble with a sole proprietorship, it could wipe out your bank account and your home could be possessed.
 
Sole Proprietorships & Taxes:
 
A sole proprietorship is seen as a business and owner as one.  Unlike other business structures that pay their taxes through the company, you are personally responsible for taxes.  All taxes are claimed by the owner, including all losses and gains.  Along with withholding funds for Federal and State taxes, you might also have to pay taxes for your social security and Medicare.
 
How Registration Works:
 
You will have to register and pay a small tax which will then give you a license and tax registration certificate in order to run your business.  You should also apply for a federal employer identification number through the IRS.  This identification number will allow you to withhold taxes from future employees you might hire. Also, apply for a zoning permit from your local land planning board, if applicable.
 
If you want a business name instead of using your name, you have to register the name with your local county or state and known as a DBA or Does Business As.
 
Before starting a Sole Proprietorship, you should know all your personal responsibilities and consequences that might come along.  Talk to someone who has the knowledge and experience in business structuring to find will work best for you, before proceeding.

About Liabilities:
 
Members are not normally held responsible for the company's debts that they did not personally pledge.  Their assets including savings accounts and homes are protected if the company falls into bankruptcy or if it is under a lawsuit.  That said, that is not always the case.  Courts can set aside limited liability and hold shareholders or directors personally responsible for the company's debts which are known as “Piercing The Corporate Veil”.  This usually only happens when there have been charges of fraud or other criminal actions by the members.  This is not an area that is easily predictable because the courts will deem what they consider and criminal act or fraud.
 
About Ownership:
 
A Limited Liability Company is not required to have a certain set of members.  That said, if there is only one owner, then their LLC will be taxed as a Sole Proprietorship.  Therefore, you should look into the advantages and disadvantages of a Sole Proprietorship. Owners do not have to be residents or citizens of the US and, in some areas, your LLC can actually be owned or a member of another LLC.  As an LLC, you do not have to hold board of directors or shareholders meetings.  Members will decide the various aspects of the company such as what management or ownership structure will be in place.  Members will determine profit distribution, who will be a managing member, and which members are allowed to vote.
 
About Taxes:
 
As mentioned above, members can report the company's profits on their individual tax returns, unlike corporations.  They will not be taxed twice on the income of the business and their personal earnings.  Members earned income is usually created by running the business and/or through regular pledged payments.  One of the best advantages regarding taxes is having the ability to deduct health insurance costs, or any losses incurred by the business and claim it on their individual taxes.  Keep in mind, if you are a managing member, your income is subject to self-employment taxes.   While members who are not managing members are not held under self-employment taxes, they are limited in what can be deducted on their personal taxes, including company losses and expenses.
 
Under The LLC's Operating Agreement:
 
This agreement may be used to dictate how a member's interests are transferred or sold to someone else.  For instance, if a member wishes to sell their shares or set up an agreement to pass their shares on to their family, in the case of their death, it can be easily accomplished.  This is a great deal easier to carry out and not bog down members with extensive paperwork or company bylaws.
 
This will protect family members from dealing with problems or facing unforeseen consequences from not dealing with problems that could arise around the corner.  The entire process of transferring interests is very easy.  When a member dies, the assets are immediately passed on to the family without facing inheritance taxes, in most cases.
 
There are many excellent advantages but also make sure you understand the disadvantages in forming an LLC.  Study up and do your homework to determine if this is the right avenue for you!

​When you start a new business, your decision to incorporate or not is a critical one. Sole proprietorships (narrow scope), partnerships (not as much protection from personal liability) and limited liability companies (LLCs) are other kinds of legal business structures to consider. Corporations, like any other legal structure, have specific benefits and drawbacks. The nature and your kind of business will be a deciding factor if you should incorporate or not.

PROS
Legal Liability Protection for Owner: When the new owner(s) of the business have successfully incorporated, they have a reduced level of legal responsibility for the corporation's business functions and debts, since the law sees the corporation as an independent entity. For the corporation to keep its limited liability status, the owners have to adhere to certain mandatory legal corporate formalities.

Ability to Attract Investors: The Corporation can attract investors by issuing stock to provide capital for expansion of the business.

Power Structure: Corporations have a proven power and management framework that includes directors, officers as well as shareholders. The roles and responsibilities are clearly outlined for the various groups in the corporate structure.

Employee Stocks and Stock Options: Large corporations have the ability to offer stock benefits and stock options (employees can buy the stock at a predetermined price) as an appealing option for potential employees.

CONS
Time and Expense of Incorporation: Incorporating is a time-consuming and costly process. Numerous documents have to be prepared (like articles of incorporation and bylaws for the new corporation), along with filing fees that are paid to the Secretary of State Office or similar agency in your state.

Following Corporate Procedures: All corporations have to follow certain corporate procedures by law, which guarantees that the corporation is functioning as a separate entity, independent of the owners of the business.  These steps consist of regular directors meetings, maintaining corporate activity records and sustaining the continuing financial autonomy of the corporation.
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Potential Tax Liability: Traditional corporation profits might be "double taxed." This means that profits earned by the corporation itself are taxed and individual stockholders who received dividends from the corporation are taxed too. This usually happens in bigger corporations and might not affect the owners and stockholders of smaller corporations because they are usually employed by the business itself and get salaries, which is a tax deduction for the smaller corporation instead of dividends. The tax status of an "S" corporation is a possible solution to double-taxation.

Can An Individual Buy & Sell Stock?
 
If an individual buys stock in a corporation they will received a certificate that shows how many shares they have purchased.  With a public company, the individual can transfer any and all of their stocks as well.  If an individual wishes to sell their shares, they do not need the approval of other stockholders and the same is true for purchasing stocks.  Privately held companies may have restrictions on the transfer of stocks.
 
Do Investors Manage The Corporation?
 
In general, no.  Most corporations hire their own team of managers to operate the company.  The investors will vote to decide who will hire the management team.
 
How Corporations Raise Capital:
 
A corporation can easily raise capital by selling stocks and bonds which provides the corporation with a greater amount of resources because they are not limited to a small number of people.  Because of limited liability and the ability to transfer ownership rights makes it very easy to raise capital by selling stocks and issuing bonds.
 
Corporations Must Deal With Problems Or Pay The Consequences:
 
A corporation's objective should be dealing with at least 80% of all problems.  There should always be a set deadline for making decisions and stay with those decisions.  Decide who will be responsible for solving problems.  If a corporation does not have someone in place, there can be serious repercussions.
 
Problems that can arise might be due to poor management, unforeseen damage to stockholders, not realizing the full potential value of a corporation, and not offering incentives for better management.
 
 
Are There Government Regulations For Selling Stock?
 
There are government regulations in place for selling stocks in order to protect the stockholders and the owners.  State laws have their own requirements for issuing stocks and distributions to the stockholders.  Publicly held entities with stocks trading on the stock exchange are required to file their financial statements and other needed documents with the Securities and Exchange Commission.  Federal securities laws govern the sales of stocks.

​THIS WEEK WE PRESENT

Describe your services or product? Boutique Immigration Law Firm offering general Immigration services including Family-Based Visas, Naturalization, Defense in Deportation Proceedings and Investment and Employer Visas

Where do you reside?  Miami, FL

What is your hidden talent?  I am an expert multitasker.

What is something that most people do not know about you?  I danced ballet for nearly 10 years. 

What is the top item on your bucket list? (For example a place you wish to visit or activity that you wish to engage in like a marathon).  I would love to travel the world- top of my list right now is Australia/New Zeland
​
Describe the profile of your client? (Keeping in mind possible clients in foreign countries.)  A foreign national looking to start or purchase a business in the United States.

Describe the profile of the strategic referral partners that you wish to meet both in and outside of your country? Business Brokers, Business Attorneys, Family Attorneys, CPA's.

What is your contact information?  (305) 741-4214 or melissa@mdominguezlaw.com

What is the key to your success or favorite quote?  If you can dream it, You can do it- Walt Disney.

Unlike an individual, a corporation cannot run for a public offers or vote.
 
How A Company Becomes A Corporation:
 
In order to become a corporation, they must file an application that provides articles of incorporation with the State of residence, pay the incorporation fee, and must be approved by the State.  Once approved, they must create their bylaws. Because drafting bylaws is one of the most important steps for forming a corporation, it's essential there is an attorney on board.  The attorney will watch over transactions to ensure everything is conducted properly. Other organizational costs include legal fees, fees for the underwriters for stocks and bonds, and incorporation fees that are recorded as intangible assets.
 
The stock certificates represent ownership of the corporation and the owners are the stockholders.  There are several activities that stockholders deal with including voting for the members of the Board of Directors and other issues that require the actions of the stockholders.  Stockholders can also deny additional shares being offered in order for them to maintain greater control of ownership both before and after the distribution of shares.
 
There are several aspects that separate a corporation from other businesses such as partnerships or sole proprietorship.  Forming a corporation can provide a sense of accomplishment, prestige, and a great deal of satisfaction once everything is in place.
 
Who Elects The Board Of Directors?
 
The Board Of Directors are elected by the shareholders that are nominated to be brought before the shareholders.  In many cases, this is done by the founder of the corporation.
 
Does A Corporation Have Perpetual Existence?
 
The charter of a corporation can limit its life but the charter is usually extended.  A corporation will continue even if a stockholder dies, an employee is unable to continue, stocks are sold, etc.  A corporation is owned by stockholders but managed by the employees.
 
Can Creditors Take Stockholders' Assets?
 
The liability of a stockholder is limited to the amount they have invested in the corporation.  Their personal assets are off limits to creditors that are looking for payments owed by the corporation.
 
 
Corporations Can Own Property & Have Certain Rights:
 
Corporations are considered separate legal entities that perform business operations.  It can own property, enter into binding contracts, borrow money, pay taxes, and can be sued or can sue. 

Please let us know how we can help you with a referral or introduction to this professional or other similar ones.  Contact us at 305-548-5020 or email us at fd@molawoffice.com. 

This is a post by the Law Office of Yoel Molina, P.A.  A law office based in Miami, Fla. We focus on business, corporate and civil litigation matters.  Our services are available to clients based in Miami, Ft. Myers, Naples, Orlando, Tampa, Ft. Lauderdale,  Jacksonville, Palm Beach, Mexico, Argentina, Chile, Colombia, Panama, Russia, Ukraine, India, Turkey and beyond.  Call 305-548-5020 or email us at fd@molawoffice.com for more information. ​