1. What is an S-Corp?
ANSWER: An S-Corp is a U.S. business structure that provides pass-through taxation, meaning profits and losses are reported on shareholders’ personal tax returns, avoiding corporate taxes. Shareholders enjoy limited liability protection, but there are ownership restrictions, including a limit of 100 shareholders who must be U.S. residents or citizens. S-Corps can only have one class of stock and allow for self-employment tax savings by paying shareholders both salaries and dividends. It’s popular for small businesses due to its tax benefits and legal protections.

2. What is an LLC?
ANSWER: A limited Liability Company (LLC) is a flexible U.S. business structure offering limited liability protection for its owners/members. It provides pass-through taxation, meaning profits and losses are reported on members’ personal tax return, but it can also choose corporate taxation. LLC’s allow flexible management, have no ownership restrictions, and require fewer formalities compared to corporations. They also offer flexibility in profit distribution, making them popular for small businesses due to their simplicity and legal protections.

3. What is a Sole Proprietorship?
ANSWER: A sole proprietorship is the simplest business structure, where the owner has full control but also unlimited personal liability for the business’s debts. It’s easy and inexpensive to set up, with simple taxation, as business income is reported on the owner’s personal tax return. However, the business lacks continuity, ending if the owner dies or stops operations. Sole proprietorships are common among freelancers and small businesses due to their simplicity, though the owner’s personal assets are at risk.

4. What is a partnership?
ANSWER: A partnership is a business structure where two or more individuals share ownership, responsibilities and profits. There are different types, including General Partnership (GP) with shared management and unlimited liability, Limited Partnership (LP) with both general and limited partners, and Limited Liability Partnership (LLP) offering liability protections. Pass-through taxation allows profits and losses to be reported on partners’ personal tax returns. Partnerships often have partnership agreements outlining roles and profit-sharing. In general partnerships, owners face unlimited liability for business debts making it a riskier structure.

5. What is a C-Corp?
ANSWER: A C-corp is a U.S. business structure where the company is a separate legal entity from its owners, offering limited liability to shareholders. It faces double taxation, with the corporation paying taxes on profits and shareholders paying taxes on dividends. C-corps can have unlimited shareholders and offer perpetual existence, ensuring continuity. They follow a formal structure with a board of directors and have greater access to capital by issuing stock. However, there are subject to more regulations and reporting requirements, making them more suitable for larger businesses.

6. What is a non-profit organization?
ANSWER: A non-profit organization (NPO) operates to support a social cause or mission rather than generating profits for owners. It is typically tax-exempt, meaning it doesn’t pay taxes on income related to its charitable activities. Non-profits reinvest profits into their mission and cannot distribute them to members or leaders. They are governed by a board of directors and rely on donations, grants and fundraising for funding. Non-profits must maintain public accountability by being transparent with financial records and adhering to specific governance rules.

7. Which entity should I choose for my business?
ANSWER: Choosing a business structure depends on factors like liability, taxation, ownership, and growth plans. A sole proprietorship is best for single owners, simple setup, but unlimited personal liability. A partnership is for multiple owners with shared responsibility, but general partners face unlimited liability. An LLC provides liability protection, flexible taxation and is good for small to medium businesses. S-corps offer tax benefits and liability protection, but have ownership restrictions and more formalities. C-corps are ideal for large businesses and easier to raise capital, but faces double taxation and more regulations. Non-profit organizations are created for charitable missions and offer tax-exempt status, but profits cannot be distributed. You will want to consider factors like liability, taxation and growth when choosing your business structure. Always consult a professional if needed.

8. Do I need a business plan?
ANSWER: Yes, a business plan is essential for several reasons. It helps you organize and clarify your business ideas, provides a roadmap for growth and is crucial when seeking funding from investors or lenders. Additionally, it outlines your market research, strategies, and financial projections, which guide decision-making and allow you to measure progress. While it doesn’t need to be overly detailed at first, having a foundational business plan is beneficial for long-term success.

9. How do I fund my new business?
ANSWER: There are several ways you can fund your new business. Self-funding (bootstrapping) is when you use personal savings, which gives control but risks personal assets. You may also consider getting a small business loan from banks or the SBA. These require good credit and interest repayments. Investors may help with starting a business. You may seek angel investors or venture capital in exchange for equity. Crowdfunding is when you raise money from the public on platforms like kickstarter without giving up ownership of your business. Grants are competitive funding options that do not require repayment. Friends and family can also be a good option when starting a new business. You may be able to borrow from personal networks but can also risk personal relationships.

10. When will my business turn a profit?
ANSWER: When your business will turn a profit depends on factors such as industry norms, initial investment, and market demand. Some businesses, like retail or services, may become profitable within a few months. while others with high startup costs may take several years. Managing your revenue versus expenses and controlling costs is key, and heavy reliance on loans can delay profitability due to interest payments. Planning for at least a year of operations without expecting immediate profit is crucial.