Nonprofit

• Offered to everybody

• Nonprofits an be very selective

  • NAACP Scholarship

• Race, creed, color, sex discrimination

Limited Liability Companies (LLC)

• Type of ownership that joins elements of a corporation and a partnership

• Advantages: Limited liability, pass through taxation, fewer government regulations

• Disadvantages: Filing fees, self-employment tax, no national laws for operation

• Very popular business structure for people that want protection from what their business is doing. It affords limited liability, the ability to say this is what the business is doing, not what I am doing.

• An odd blend of partnership and corporation, borrowed pieces of each. Protection as an LLC, and memberships/managers.

  • Shield like a corporation, but still individuals (pass through taxation).

• Based on percentage ownership of LLC, which you set up in an operating agreement. At the end of the year, when accountants go up and do gross profit. They give you a Scheduled K1. The percentage is attributed to past view and reported income as personal taxes: pass-through to individuals. Taxes work similarly to sole proprietorship.

  • Income flows to each member based on their percentage ownership.

• More freedoms than standard corporations, more regulation than an individual.

• Texas allows single-member LLC, different from all other states.

Cooperatives

Although less common than sole proprietorships, partnerships, and LLCs, a cooperative (coop) is a type of business that is owned and managed by members of a group who benefit from services the businesses provide.

• Advantages: Benefits members, control, financial interest

• Disadvantages: Management challenges, loss of interest, competition.

• Austin farming coop. All people that live and work on the farm get the food from the farm. Join together to purchase more areas of land to operate as a larger entity. Gets some tax profits, since it’s a bridge between nonprofit, for-profit REI, and partnership.

• Normally, you can never drive your own profits from a nonprofit.

• Ex: Housing coops, teacher coops, homeschool educational coops.

C-Corp

• Based on IRS Tax Code

• As many shareholders as you want

• Corporate tax (double taxation, dividend/selling will get taxed)

• Flat corporate income tax of 21% (used to be 37%, Trump came back in 2017 and signed a law that reduced the corporate income tax)

• Texas does not have corporate tax, but does have Gross Receipts Tax

• Most people think of C-Corps

• Can be publicly or privately traded

S-Corp

• “Small” corporation

• Members have to be people, cannot have corporations owning

• 100 people or fewer

• Some exceptions about trusts and real estate

• No partnerships are allowed to be part of the S-Corp

• Smaller version of corporation in the tax code, and gives some nice benefits

• It looks and feels like a corporation in terms of shareholders (create and sell stocks)

• If you ever exceed 100 people buying into company, becomes C-Corp

• Protections in tax code is that it flows to personal income tax like an LLC (closest thing to national LLC)

• Qualifies as corporation for Capital Gains Tax

Benefit Corp

• Adjacent to a nonprofit

• Owners not liable

• Corporate tax

• It has tax code benefits that can be reduced

• Must be a corporation that is for the benefit of another person or group of people

• Like a nonprofit, but it can still make money

• Ben & Jerry’s, Patagonia

Nonprofit (501c3)

• 501c3 is section of tax code that governs nonprofits

• Owners not personally liable

• Tax-exempt

• CEO Salaries make lots of money

• Lots of pay for executive staffing

• Example: Church

• Excess funds must go to their specific written-down purpose

Choosing a Location and Structure

• Defining a type of business also takes into consideration the location and structure of the entity. For instance, will a new business be located in a physical storefront in a metropolitan area or online

• Brick and mortar: Traditional business serving customers in a physical building as contrasted to an online business

• Virtual Enterprise: A virtual enterprise - called e-commerce - is a business that operates entirely online

• Click and Mortar Enterprise: Mix between a brick and mortar and virtual enterprise. It offers goods and services in a traditional storefront and internet commerce.

International and Foreign Laws

• Treaty: Formal agreement between countries that states agreed upon notions of international relations. A type of treaty that affects business trade is called a trade agreement, a treaty that outlines procedures for trade between two or more countries. Formed to encourage economic development in multiple countries.

  • EU

  • NAFTA

• International Customs: Countries have the right to decide what they can and cannot trade. International customs comprise a body of law that controls the flow of goods and services into and out of countries.

• Texas: Right-to-hire, right-to-fire

• Work laws and culture are very different in France.

• Different laws on environment, customer safety, regulations, copyright laws, patenting laws, IP laws, etc.

• Copying things in China is a skill

• Import tariffs

Filing Process

• Choose structure

• Register your business with the state

• Get federal tax ID number (EN = Employer Identification Number)

• Licenses and Permits

  • State Sales Tax Permit

  • Inspections, Distribution Permits, Safety Permits, etc. (may be state, county, or even city)

• Other activities, like bank accounts, funding, etc.

Creating Business Structure

• Many new small businesses choose to begin as a sole proprietorship using a B2C customer business model. Some business owners opt for a partnership in which each partner brings a different skill set.

• Regardless of which form of ownership or customer business model an entrepreneur selects, he or she must be knowledgeable on the following areas to create an effective business structure:

  • Advantages and disadvantages of business types

  • Customer market

  • Regulation laws and policies that impacts

  • Locations

Establishing Business Structure

• What ownership

• B2B, B2C, B2G, etc.

• What locations and structures should you consider

• What regulations, policies, laws

Required Docs for Filings

• Articles of Incorporation

• Operating Agreements

• Initial Tax Filings

• Earning Reports

• Stock Certificates

• Registered Agents

• Incorporations

For Texas:

• Close corporation (agreements vs bylaws)

• Single person owner

• For profit corporation and proof of corporation

  • Directory, president, secretary

• Nonprofit

  • 3 directors, one president, one secretary

  • President and secretary must be different

• Officers and directors must be natural persons

• As a business, you can choose your own fiscal calendar

Taxes

• Business tax rates

• State vs federal

• Franchise taxes

• Sales taxes

• Corporate tax

• Medicare and social security

• Self employment tax

• Tariffs

• Capital gains tax

• Different states have different laws