AF air-jordan air-max chanel coach gucci louis-vuitton michael-kors newblance omega
  Login  Español
Arizona
Arizona
Business > Type of Business Entities


Corporations

Generally
Business and business owner: separate legal and tax entities
Filing fees, incorporation fees and annual reports: required
Limited Liability: owners have limited liability if the company is properly formed, adequately capitalized, and corporate formalities are followed; owners are, however, legally responsible for their own actions and any actions by other owners of which they have approved
Life of business: unlimited
Loan availability: banks more willing to loan capital
Transferability of interests: the business may be set up so that shares or interest in the business may be easily transferred
Corporate formalities: at minimum the shareholders and board of directors must hold a meeting once a
year; annual report and $45 filing fee must be submitted to Arizona Corporation Commission

“C” Corporations
taxed under subchapter “C” of the IRS code
Number of owners: one or more
Profits and losses: reported by the entity
Taxes: the entity is taxed at the corporate level; the tax rate is higher than for most individuals (except     for some personal service corporations)

  • Operators are paid salaries and may avoid paying income tax on company profits by leaving profits in the company
  • owner pays state and federal unemployment tax and FICA on salary paid to him/herself
  • owner does not pay self-employment tax on earnings
  • income from sale of the business may be heavily taxed

Fringe benefits: favorable tax treatment
Ownership options: complex ownership interests may be created through use of stock options

“S” Corporations
taxed under subchapter “S” of the IRS code
Number of owners: one to 100 shareholders
Profits and losses: reported by owners
Taxes: owner should pay him/herself a reasonable salary, which is subject to all withholdings, or owners may be subject to self-employment tax on all business earnings
Fringe benefits: moderate tax advantage
Ownership options: only one class of stock is permitted, no non U.S. Citizen may own more than 20%
Restrictions on ownership: owners must be individuals, estates, or certain trusts, but cannot be other corporations

  
Limited Liability Companies

Number of owners: one or more
Business and business owners: separate legal entities; may elect to be taxed as either a partnership or a corporation
Filing fees: required to form the LLC
Annual reports: not required
Limited Liability: owners have limited liability if the company is properly formed, adequately capitalized, and corporate formalities are followed; owners are, however, legally responsible for  their own actions and any actions by other owners of which they have approved
Life of Business: unlimited unless otherwise specified
Profits and Losses: reported by owners at a percentage pursuant to agreement
Taxes: entity may elect to be taxed as a corporation, partnership or be a disregarded entity
Loan availability: banks moderately willing to loan capital
Transferability of interests: restrictions detailed in Operating Agreement otherwise transferable
Corporate formalities: none unless designated in the Operating Agreement
Restrictions on ownership: any person or entity may be an owner (unless electing to be taxed as an S-corporation)

  
Partnerships

Number of owners: partnership is automatically created when two or more people begin a business or joint venture for profit even if they do not have a contract in writing
Business and business owner: partnership is considered a separate entity but partners still have personal  liability
Profits and losses: reported by owners
Taxes: general partners pay self-employment tax on net business earnings; limited partners do not pay self-employment tax
Fringe benefits: generally not deductible; a percentage of health insurance is deductible
Loan availability: banks wary of loaning capital
 
    General Partnerships:
    Personal Liability: owners have unlimited personal liability
    Extended Liability: owners may be liable for the actions of other owners
    Management: owners can bind, or contract on behalf of, the partnership

    Limited Partnerships:
    Personal Liability: one owner is a general partner and retains complete personal liability
    Limited Liability: limited partners have limited liability up to the amount of the investment
    Management: limited partners are restricted as to the amount of participation and control they have over the company
    Filing:  must file with Arizona Secretary of State to form Limited Partnership

  
Sole Proprietorships

Number of Owners: one only unless husband and wife are owners
Business and business owner(s): same entity
Profits and losses: reported by owner on individual tax return
Finances: can co-mingle with owner’s finances; maintaining separate accounts is preferable
Filing, incorporation fees, annual reports: not required
Taxes: owner pays self-employment tax on net business earnings
Personal Liability: owner has unlimited personal liability
Fringe benefits: generally not deductible; a percentage of health insurance is deductible
Loan availability: banks wary of loaning capital

  
 
Disclaimer
The information provided in this website is meant only as a general description of the current laws as of the date of the writing. It is not meant to be an exhaustive discussion of all the nuances of the law and is intended to be only an overview. Many issues may appear simpler than they are, and an individual should always contact an attorney to obtain a complete, accurate interpretation of the law given the individual's particular circumstances. Thompson Law Group, P.C. makes no representations as to how the law would affect a particular situation and intends only to illustrate areas of concern and give general information.

Copyright 2011 @ Thompson Law Group   Terms Of Use  Privacy Statement