In today’s episode, I am briefly talking about the most popular business structures for entrepreneurs and influencers. 

Sole Proprieter : 

• Single Owner

• Profit/Loss filed on Schedule C of your personal tax return

• Pay yourself as needed based on profits of the business

• Personally liable for business obligations

LLC (Limited Liability Company) : 

• Register with your state, requires paying a fee (usually minimal)

• Obtain an EIN (a federal number assigned to your business, replaces the use of your social security number when it comes to business matters)

• Profit/Loss filed on Schedule C of your personal tax return

• Pay yourself as needed based on profits of the business

• Shielded from personal liability

S-Corp : 

• Registration, as stated above, required

• File a separate business tax return that would flow to your personal return

• Could provide tax savings benefits, please consult with your tax professional or CPA

• Must pay yourself a reasonable salary 

• Shielded from personal liability 

There are so many things to consider and the answer can vary from business to business, however; LLC is the most common structure that I see. Always consult with your tax professional or CPA to determine what structure is best for you and your business. 

xo,

Stephanie 

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full transcription below

Hi, welcome to another week of podcasts. Um, so today I wanted to start with, um, a question that had come up. So a couple of weeks ago I had placed a question box in my stories on my Instagram account side note. If you’re not already following me there, I met Stephanie Parenza and, uh, I do talk about the podcast, bookkeeping, accounting, but also, uh, doses of fashion and local and life with family and as a mom entrepreneur.

So come join me over there. But anyways, I back to where I was at, I had posted a question box in my stories, just reaching out to you guys to see what you wanted to know, uh, whether it be about influencing or bookkeeping, accounting, or starting a business, just whatever a burning question you guys had. And one of them that came up a few times was where to start. You are getting ready to start a business, or you’ve been doing something and it’s growing. So you want to go ahead and like solidify the business aspect of things. And you were curious as to what type of business structure you should set up. And so I just wanted to briefly today go through some of the options for business structures, and I’m going to touch on three of them. There are additional structures you can consider, but, uh, they would be like partnerships or C corporations, things that I think aren’t really going to be in the realm of who you are and who I’m assuming I’m talking to here.

And that is you. Mama entrepreneurs, you solo entrepreneurs and influencers. So if you have specific questions about partnerships or C corpse, feel free to reach out to me privately in a DM, and we can go through that. But today I just wanted to touch on the three that I think would be considerations for you all. So we’re going to start with sole proprietor and sole proprietor basically means you don’t really need to do anything you don’t need to register. You have started this business and you are just claiming it as a business. You’re not going to register with the state or register for, um, an EIN. You’re going to use your social security number when you’re filing your taxes. You’re going to claim your profit and loss on your personal tax return via a schedule C. And really, you’re just going to go about your day to day running this business as yourself.

And that is it. So you are one person as a sole proprietor. And unfortunately the one con to this, um, structure would be that you are also personally liable for all the business obligations. So if something were to go South in your business, they could come for your personal assets and your personal money to satisfy those business obligations. So when I’m talking to people about this, I want, I always want to make sure that is clear that you have a lot of personal liability with us, just a sole proprietorship. Um, the other thing to maybe consider as a sole proprietor is I’m sure you’ll want to pay yourself. Assuming your business is making profits. There’s really no rules here. You can draw out money from your profits of your business as they come, as you see fit. So that is nice. I think another thing to consider and kind of going back to that con, is that any time you needed to give the business information, let’s say you’re going to get 10 99 to buy somebody, which we’ll, we’ll go more in depth about 10 99.

In the meantime, if you have questions, always feel free to reach out. But if someone were to have to get your information, you are going to have to give out your social security number. So I want you to also consider that. So I don’t tell you these cons to do, to deter you from doing a sole proprietorship, but I do want you to consider those because they could be two big things, giving out your personal information and having that personal liability, definitely things to consider, depending on what you’re doing for business. It may not matter that much, but as you grow and take on more, it may become more imperative that you consider another business structure. The other business structure that is probably the most common. And the one that I usually suggest for most people would be the LLC limited liability company. And so what this does, it’s not much different than the sole proprietorship.

You do have to register with your state. You do need to get an EIN number from the IRS. And for the most part, now this vary state by state, uh, the fees are pretty minimal. There are some States that maybe require a larger fee, especially as you’re in more of those larger cities or States. Those are things to consider there. Maybe I financial burden there, but for most, I would say it’s very minimal. And what this LLC will do for you is protect you personally. So it’s going to shield you. So if something, or to go on in your business, your personal assets are shielded. And I think this is really important. Same thing as a sole proprietor, you will be able to take what’s called a member’s draw, which means you can decide when, and if you pay yourself based upon the profits of your business, your profit and loss will also flow through to your schedule C again.

So your tax on your personal tax return, meaning you only have to file one tax return and everything flows through that. The other thing I like about an LLC is it legitimizes your business. So when you create your business and you get to put comma, LLC, it really just shows people that you are here, you are ready to take on, uh, you know, with your business and that you really are like putting your heart and soul your business. You’re going to move forward. I just, I just love that. It really just, like I said, legitimizes you and your business, having that title and just not only showing the like your community, but also if the IRS or a bank or anyone were to come in and want to potentially help you with your business or have to audit your business, you get to really show them that you are a business.

There are no questions because you’ve taken the time to set up this structure. The third option I wanted to walk through today is called an escorp as corporation. So this is a little more structured, and I’m going to preface this with any time you want to consider this one. I would always go to your tax professional or your CPA first to determine if this is the right way for you. The differences here are an S Corp does provide you with some tax benefits. You’ll pay less self employment tax this way. Um, but you are required to pay yourself a reasonable salary. So you’ll have to put yourself on payroll. The other thing is this does require a separate tax return, but that tax return basically will roll into your personal tax return. So you don’t necessarily pay two different payments, but you do have two different tax returns.

And then that S Corp tax return will roll into your personal tax return where you were paid tax. So that’s kind of the big difference about S-corp. I did want to throw it out there because sometimes it can provide like great tax benefits, definitely something to consider, but I want you to make sure you’re going to your personal tax preparer or CPA to talk about it because they know the ins and outs of your business, as well as your, hopefully your personal side. So they can really tell you if it will help you guys. I have to take a moment to let you know, you’re probably going to hear my cats in the background wrestling. I am doing this from my office space, but they are free to roam and I, and not wanted to edit it out. So I am sorry if you hear them in the background, this is my life, and this is how I am bringing these topics and facts to you.

So back to where we were at. So what I want you to take away from today is that there are three business structures that you should consider as an entrepreneur or an influencer, and really what it comes down to is always seeking some advice from your tax preparer or CPA, and, uh, really deciding how you see the future of your business. Um, I’m going to remind you again that most commonly, I would tell you to go ahead and form an LLC, just to give yourself that personal, you know, security and also to legitimize your business. So I hope you found this helpful. If you have more specific questions about your business and starting it and what you should consider, um, as far as your structure, feel free to reach out to me via email or come on over to my Instagram or Facebook community, going to ask me there. And I will see you all later this week.