Just like any other business, when you start a cleaning business, you need to decide what type of legal structure you will have. The legal structure of your business is very important because it affects the amount of taxes you will pay and the legal liability you have. Other than that, the requirements for additional documents and paperwork can be determined through the type of legal program you will have. It can also be a problem when it comes to how much money you are making and how much you can borrow for your business.
There are different types of legal programs you can choose from:
The first type is the individual owner. It is one of the easiest types of legal programs which makes it very common for small businesses. In this type, the owner has control over his industry. He is solely responsible for the business. This can be good because you can be in control and you can decide for your business. The drawback of this type of legal program is that since you are the sole owner, any issues related to the business, such as financial problems, you will only be solely responsible. If something happens wrong, it is your obligation and responsibility. Other than that, the total FICA taxes that must be paid are up to you. In other cases, the owner can match what the workers pay, but if you are the sole owner, you have no choice but to pay the full 15%.
The second type is the Association. In this type of business, there are two or more business owners. The owners share the responsibilities as well as the income of the business. All earnings must be approved by each individual. It is then reported that he agrees with her tax returns. Similar to the sole proprietorship, the owners are also responsible for any monetary obligations of the business.
The last type is the C Corporation. This type of business is usually large and open to other entrepreneurs. The income tax paid by C Corporations doubles every time they pay dividends. There are many requirements in this type of company. The corporation is required to file a return and pay tolls on its income before distributing dividends to its shareholders. Once shareholders receive their dividend, they must keep it as their income that will be taxed again.
When it comes to your company’s legal liability, sole proprietorships or partnership-type companies are responsible for any type of problem. This means that if the business is sued, the individual assets and income of the owner can be taken.
In terms of the tax to be paid, sole proprietorships and partnerships are less taxed compared to C corporations that pay double tax. In C Corporations, in addition to the profit of the industry, the individual profits of the shareholders are also taxed. In general, the sole proprietorship is the easiest type of company, as it requires less, but if you are looking for a large-scale business, C corporations are best for you.
