Why Set Up A Proper Business Structure? Case Study

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Why Set Up A Proper Business Structure? Case Study

Sanjiv Gupta CPA specializes in setting up businesses in San Jose, Santa Clara area. His office is located in Sunnyvale CA. You can call 510-825-7563 to set up a “Business Formation” appointment.

Let’s talk about the incorporation from the tax and business survival point of view.

The first question you need to ask is who is forming the corporation. US Citizens, Green Card Holders, or H1B Visa. What kind of corporation you will form is going to depend on this.

Second, what kind of business will you be doing. Some businesses are better off having an LLC and some businesses are better off with S or C Corp.

S Corp can help with self-employment tax and LLC can be quite easy to maintain.

Each business is unique, and it is important to discuss the tax implications and business survival.

A couple of years ago, two brothers formed a partnership to purchase a Macdonald Franchise. However, they concealed this partnership from Mac-Donald and signed the franchise agreement under one of the brother’s name. New Macdonald franchisee died few months later. This caused major turmoil in the family.

The surviving brother claimed the share in the estate, but his request was rejected. This was mainly due to the fact that partnership was canceled from Macdonald, and their franchise agreement was based upon a misrepresentation by the brothers.

Moreover, this gave a reason to Macdonald's to terminate the franchise agreement. Talk about the loss of the brother and loss of assets like Macdonald Franchise.

We can all learn from this example and set up our business structure properly. Give Sanjiv Gupta CPA firm a call if you would like to discuss your business structure.