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In Indiana there are a number of legal vehicles through which a business may be operated. The most common forms of business organizations are the proprietorships, partnerships, corporations, and limited liability companies. This is not an exhaustive listing.
Business considerations and tax considerations generally drive the choice of the business entity.
Among the business considerations are issues involving limited liability, management, continuity of life, transferability of interests, types of owners, number of members, and classes of interests.
Among the tax considerations are the taxability of income, the certainty of tax status, distributions to owners, special allocations, deductibility of losses, basis adjustment availability to entity assets, flexibility and structuring of retirement payments, taxation upon distribution of depreciated assets, insolvency, exceptions to discharge of indebtedness, accounting method, taxable year, treatment of medical insurance premiums, and employment taxes.
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PROPRIETORSHIP - the simplest of business entities. Purely an individual involved in business without partners and not incorporated.
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CORPORATION - a legally formed entity recognized by law. For tax purposes a corporation can elect to be an S-corporation or, without election, a C-corporation.
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PARTNERSHIP - an association of two or more individuals engaged in business for profit. There are specific tax codes and regulations that apply to partnerships. Partnerships may also take the form of limited partnerships and limited liability partnerships.
- LIMITED LIABILITY COMPANY - a somewhat recent form of business organization recognized by the Indiana Business Flexibility Act. It is an unincorporated form of business organization similar to a general or limited partnership but having a limited liability shield which protects its owners from liability to the same extent that shareholders of the corporation are insulated from its debts and obligations. A limited liability company can elect, for tax purposes, partnership or corporate status, and the choice is important.
BPMJ&L can assist and guide you to the choice of the legal vehicle under which you will do business and educate you with respect to the tax features involved.
BPMJ&L can also assist you with the conversion of your current business organization into a new or different organization.
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