What's the Best Entity? Solve the Mystery of Legal Organization

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Small business owners typically know a lot about the operation of their business, but frequently struggle with managing the financial part of the business. Even though they use an accoutant, a bookkeeper or financial software, their lack of financial skills are a continuing obstacle to growth and sound decision making. In this course Small Business Owners will learn to collect, organize and use their financial information to make better decisions. Understanding the numbers and their complete impact on cash flow, profitability and company value will give you a whole new perspective on running and growing your business.
  • 1. Sigma Free Presents… What’s the Best Entity? Solve the Mystery of Legal Organization Provided by Sigma College of Small Business, Inc.
  • 2. Agenda Introductions Keynote Topic What’s the Best Entity Solve the Mystery of Legal Organization Break – Refreshments and Networking Ask  Questions  Keynote Conclusion Any Time What’s the Best Entity Solve the Mystery of Legal Organization What's the Best Entity? Solve the Mystery of Legal Organization 2 Copyright 2010, Sigma College of Small Business, Inc.
  • 3. Business Strategy Marketing Tactics Implementation Entity Structure Five Pillars Value Model Exit Strategy – Organization of a  – Perspective – Approach – Incentive – Actions Business  Strategy What's the Best Entity? Solve the Mystery of Legal Organization 3 Copyright 2010, Sigma College of Small Business, Inc.
  • 4. Sole Proprietor  Partnership  Limited  Legal Organization Partnerships  Limited Liability  Legal organization is an important decision made to support  Company  S‐ your personal and business goals Corporation  C‐Corporation  • Considerations Sole Proprietor  Partnership  – Liability – accident and financial Limited  – Taxes – Income, payroll, estate Partnerships  – Investment , ownership transfer and  Limited Liability  Company  S‐ management Corporation  • Types of Organization C‐Corporation  Sole Proprietor  – Sole Proprietor and Partnership Partnership  – “C” Corporation and “S” Corporation Limited  Partnerships  – Limited Liability Company Limited Liability  What's the Best Entity? Solve the Mystery of Legal Organization Company  Copyright 2010, Sigma College of Small Business, Inc. 4
  • 5. Terminology • Business Liability – company assets that are at risk Liability • Personal Liability – personal assets that are at risk • Limited Liability –personal liability is limited for some  reason • Personal Tax Rate – incremental tax rate on personal return • Business Tax Rate – incremental tax rate on business return Taxes • Payroll Taxes – Social security and Medicare taxes • Pass Through – Business profit taxed on personal taxes • Active Investment – investor actively involved in  Ownership management • Passive Investment – investor not involved in management What's the Best Entity? Solve the Mystery of Legal Organization Copyright 2010, Sigma College of Small Business, Inc. 5
  • 6. Liability The English Flyer The English Rose Master John Fowles Sir Richard Starkley • General Partnership • Corporation • £250 for 10%  • £250 for 10%  “ownership” “ownership” • Unlimited joint and  • Limited to £250 liability several liability • Each investor personally  • Each investor’s liability  liable for all debts and  limited only to the £250  obligations put into corporation “Own Your Own Corporation”, Garrett Sutton, Esq.,  What's the Best Entity? Solve the Mystery of Legal Organization 6 Copyright 2010, Sigma College of Small Business, Inc.
  • 7. Legal Organization  TAXES 7 What's the Best Entity? Solve the Mystery of Legal  Copyright 2010, Sigma College of Small Business, Inc.
  • 8. What's the Best Entity? Solve the Mystery of Legal Organization 8 Copyright 2010, Sigma College of Small Business, Inc.
  • 9. What's the Best Entity? Solve the Mystery of Legal Organization 9 Copyright 2010, Sigma College of Small Business, Inc.
  • 10. What's the Best Entity? Solve the Mystery of Legal Organization 10 Copyright 2010, Sigma College of Small Business, Inc.
  • 11. Entity Flexibility Millennium Salsa Thelma Hans Pepe • Investing • Investing • Investing – 2 Years low wages – Salsa Recipe – $200,000 – Management skill – Offer to help • Wants • Wants • Wants – 1/3 of business – 1/3 of business – 1/3 of business – Use of losses – Job – Job – First $300k of profit • Corporation requires stock ownership, equitable pass through of profit and loss • LLC Flexibility allows financial and management desires to be met From “Own Your Own Corporation”, Garrett Sutton, Esq.,  What's the Best Entity? Solve the Mystery of Legal Organization 11 Copyright 2010, Sigma College of Small Business, Inc.
  • 12. Investment, Transfer and Management Jim Aaron ‐ 17 From “Own Your Own Corporation” • Interests ‐ Garrett Sutton, Esq.,  – Girls Chris ‐ 15 • Interests – Rock &  Bob ‐ 16 Roll • Interests – Sports • Legal Entities can help with transfers of assets • Management Control • Financial What's the Best Entity? Solve the Mystery of Legal Organization 12 Copyright 2010, Sigma College of Small Business, Inc.
  • 13. “I’m Going to Start a Business” Legal Organization Example Generate Income for Myself Build Business for Growth • S‐Corp or LLC • C‐Corp – Liability Protection – Liability Protection – Cash can pass through  – Cash kept in company for  without double taxing growth taxed at corporate  – Losses pass through rate – 15% for <$50k • May be a draw for some  • Personal Service Corp – 35% investors – Dividends taxed to  – LLC provides more flexible  shareholders management and ownership  – Benefits to salaried  options shareholders not part of  – No “corporate” or foreign  salary investors for S‐Corp – Corporate Investors What's the Best Entity? Solve the Mystery of Legal  13 Organization Copyright 2010, Sigma College of Small Business, Inc.
  • 14. Legal Organization General Strategies • LLCs and S‐Corps – Minimum salary with higher distributions • Reduce the payroll taxes – Strategy for: • Max cash out of business • Pass through losses • C‐Corp – Higher salary, low distribuitons, high benefits • Only double taxed on distributions – Strategy for: • Retaining cash for growth • High value exit strategies (IPO or sale to public company) • For Personal Service Corporation – Zero Profit! • Limited Partnership – Allow gifting and investment while maintaining control – Manage liability through a corporate general partner What's the Best Entity? Solve the Mystery of Legal Organization 14 Copyright 2010, Sigma College of Small Business, Inc.
  • 15. Sigma College of Small Business • Focus Workshops Critical Business  – Leveraging the Online Social Network Areas • Tuesday, July 13th, 2010 Strategy and Planning • 10am –2pm, $199 Marketing and Sales • Upcoming SigmaFree Classes Accounting and  Finance – 6/15 – What’s Your Business? The Art of an  “Elevator” Pitch Operations and  Quality – 6/22 – Setting the Course! Build Your  Leadership and  Business Strategy Administration – 6/29 – Big Spending Decisions! Use More  Technology and  that a Gut Feel Innovation Dedicated to the Learning Needs of Small Business! What's the Best Entity? Solve the Mystery of Legal Organization Copyright 2010, Sigma College of Small Business, Inc. 15
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