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THE TREND REPORT: S/S 2015 CHILDRENSWEARby Wendy Bendoni Monday, January 12 2015
The Spring/Summer 2015 childrenswear trends offer a nice array of styles that will suit any kid. This season’s influential childrenswear trends include #LIKEAGIRL, Camp Hedgehog, Underwater Utopia, DIY-Kids, Mini Z-Generation, Flower Child, and Baby Hypebeasts. From boho styles inspired by the 70s to modern looks modeled after adult clothing, spring and summer 2015 will keep children fashionably outfitted. Read on...
Source: The Trend Report: S/S 2015 Childrenswear | MAGIC Blog
If the title of this article has caught your eye, you probably own a business or you are thinking about starting a business. If someone asked you what legal structure you chose and why, would you look at them like they have three heads? Do you even know what a legal business structure means? Do not despair, you are not alone. Many people have a great idea and figure out how to make money off that idea, but not so many have been to business school, much less be able to tell the difference in a LLC and a LLP. While I'm no lawyer, I did earn a MBA, therefore, let's see if I can clear up your options for you.
I'll start with the most basic of business entities, the Sole Proprietorship. All business structure decisions involve choosing between personal liability and complexity of reporting and taxes. The Sole Proprietorship sits at one end of the spectrum. While you aren't required to file many of the Federal, State, and Local tax forms as other entities require, you are personally responsible for the financial and personal liabilities associated with your business. This means that if you file for bankruptcy, or get sued, the courts can confiscate your personal possessions, including your home, cars, boats, or anything else of value that can be sold to pay your outstanding debts. Most local and state governments require all entities, including the Sole Proprietor, to purchase an annual business license.
Advantages of a Sole Proprietorship1
• Easy and inexpensive to form: A sole proprietorship is the simplest and least expensive business structure to establish. Costs are minimal, with legal costs limited to obtaining the necessary license or permits.
• Complete control. Because you are the sole owner of the business, you have complete control over all decisions.
• Easy tax preparation. Your business is not taxed separately, so it’s easy to fulfill the tax reporting requirements for a sole proprietorship.
Disadvantages of a Proprietorship1
• Unlimited personal liability. Because there is no legal separation between you and your business, you can be held personally liable for the debts and obligations of the business.
• Hard to raise money. Because you can’t sell stock in the business, investors won't often invest. Banks are also hesitant to lend to a sole proprietorship because of a perceived lack of credibility when it comes to repayment if the business fails.
• Heavy burden. You alone are ultimately responsible for the successes and failures of your business.
A Partnership is similar to a Sole Proprietorship in that the owners are personally liable for the actions of the business and report the earnings or losses on their personal income tax returns. The primary difference is, as the name implies, there is more than one owner, and each owns some part of the business. A Partnership can be formed with a simple verbal agreement between two or more individuals or business. However, the wise entrepreneur will produce a written agreement between the owners and file it with the local Judge of Probate, or similar court in your district. These agreements can be formally produced by a lawyer, generated online through one of the many legal contract sites like legalcontracts.com or legalzoom.com, or written by the partners themselves. Partnerships are also referred to as General Partnerships.
Advantages of a Partnership1
• Easy and Inexpensive. Partnerships are generally an inexpensive and easily formed business structure.
• Shared Financial Commitment. Partnerships have the advantage of pooling resources to obtain capital.
• Complementary Skills. A good partnership should reap the benefits of being able to utilize the strengths, resources and expertise of each partner.
• Partnership Incentives for Employees. Partnership incentives often attract highly motivated and qualified employees.
Disadvantages of a Partnership1
• Joint and Individual Liability. Similar to sole proprietorships, partnerships retain full, shared liability among the owners.
• Disagreements Among Partners. With multiple partners, there are bound to be disagreements Partners should consult each other on all decisions, make compromises, and resolve disputes as amicably as possible.
• Shared Profits. Because partnerships are jointly owned, each partner must share the successes and profits of their business with the other partners. An unequal contribution of time, effort, or resources can cause discord among partners.
Limited Partnerships are a special type of partnership in which one or more partners are identified as General Partners, and all others are Limited Partners. The General Partners are responsible for the management and operation of the company, and bear the liability of the company's actions and a share of the financial liability based on their contributions. The Limited Partners are only liable for the financial risk associated with their contribution to the partnership. Otherwise, a Limited Partnership is the same as a General Partnership. This type of partnership is attractive when individuals with specialized skills are skeptical of entering the partnership because of the liability risk involved. The Limited Partners are shielded from these liabilities.
Limited Liability Company
If you want to protect your personal assets from litigation of company actions, you need to establish a Limited Liability entity or a C Corporation. Limited Liability Entities come in the form of the Limited Liability Company, or LLC, and the Limited Liability Partnership, LLP. LLCs and LLPs have members instead of owners. These members can be individuals or other business entities. The LLC is a Pass-Through entity, just like the Sole Proprietorship or Partnerships, in that the earnings of the business are reported on the member's individual income tax returns. A LLP is just like a LLC except that they are reserved for groups of professionals that require a Professional License, such as an Architect, Lawyer, Accountant, or Engineer. The names of Limited Liability entities must end in either LLC or LLP.
Advantages of an LLC1
• Limited Liability. Members are protected from personal liability for business decisions or actions of the LLC. Keep in mind that limited liability means "limited" liability - members are not necessarily shielded from wrongful acts, including those of their employees.
• Less Recordkeeping. Compared to a Corporation, there is less registration paperwork and there are smaller start-up costs.
• Sharing of Profits. There are fewer restrictions on profit sharing within an LLC, as members distribute profits as they see fit..
Disadvantages of an LLC1
• Limited Life – In many states, if a member leaves the LLC, the entity dissolves and has to be refiled as a new LLC.
• Self-Employment Taxes – Members are required to file self-employment taxes for Social Security and Medicare.
A Corporation, sometimes referred to as a C Corporation, is the opposite extreme of the Business Entity Spectrum from a Sole Proprietorship. A Corporation is owned by shareholders. All liability for actions and debt of the company are absorbed by the corporation, not the shareholders. It is also easier for corporations to raise capital as they can issue and sell shares of stock to the general public. Profits are paid to the shareholders in the form of dividends based on the number of shares a shareholder owns. The down side to corporations is the vast amount of paperwork required be federal, state, and local governments and tax authorities. Corporations are best suited for larger businesses that can afford this overhead.
Advantages of a Corporation1
• Limited Liability. When it comes to taking responsibility for business debts and actions of a corporation, shareholders’ personal assets are protected.
• Ability to Generate Capital. Corporations have an advantage when it comes to raising capital for their business - the ability to raise funds through the sale of stock.
• Corporate Tax Treatment. Corporations file taxes separately from their owners.
• Attractive to Potential Employees. Corporations are generally able to attract and hire high-quality and motivated employees because they offer competitive benefits and the potential for partial ownership through stock options.
Disadvantages of a Corporation1
• Time and Money. Corporations are costly and time-consuming ventures to start and operate. Incorporating requires start-up, operating and tax costs that most other structures do not require.
• Double Taxing. In some cases, corporations are taxed twice - first, when the company makes a profit, and again when dividends are paid to shareholders.
• Additional Paperwork. Because corporations are highly regulated by federal, state, and in some cases local agencies, there are increased paperwork and recordkeeping burdens associated with this entity.
So there you have it, the primary business structures available for your company. There are others that you can investigate, however these are the most common. Which one is right for you is up to your level of comfort with risk, the type of business in which you are engaged, and the amount of time you have to handle the paperwork of the business. The U.S. Small Business Administration web site (www.sba.gov) is an excellent source of information for all of your small business needs. A tax attorney or accountant should be consulted to ensure you make the best decision for your company.
1. "Choose Your Business Structure." Excerpts Web. 4 Mar. 2015. https://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business/choose-your-business-stru.