Campbell’s Confections often receives requests from individuals to open and manage a new candy store. To help prospective owners, Campbell’s Confections has prepared a guide to provide answers to frequently asked questions.
The guide is a resource for preliminary planning—not a replacement for the services of professionals. Tax and legal professionals should be considered before final decisions are made. Business StructureOne of the first considerations in establishing a business is to determine the type of business organization to select. You should study and analyze the advantages and disadvantages of each as well as the legal and tax considerations before a final decision is made.
A brief description of the four common business organizations is listed below. Sole ProprietorshipsMany small businesses choose sole proprietorships for their business structure. A single owner is responsible for the business and retains all profits. The procedure to start a sole proprietorship is relatively easy. The amount of paperwork is much less than other types of businesses, and there are fewer regulations to follow. One disadvantage for this form of business structure is unlimited personal liability for the debts and liabilities of the business.
PartnershipsA partnership involves two or more people. When a partnership is formed, a legal agreement is usually prepared to detail the contributions or investments of each partner, the responsibilities of each partner, the distribution of profits and losses, and the terms to follow should the partnership dissolve. Limited Liability CompaniesLimited Liability Companies are also known as LLC. Limited Liability Companies are similar to corporations because owners of a LLC have limited personal liability.
LLC owners are able to manage the business like a partnership rather than a corporation because it is less complex to manage and has fewer regulations. Owners of a Limited Liability Company are called members. CorporationsA corporation is the most complex type of business organization. It is more costly to start and requires specific forms and papers to be filed with the state.
The main advantage of a corporation is limited liability to owners Identification NumbersThere are two types of identification numbers used in business registration. They are Social Security Number (SSN) or Employer Identification Number (EIN). The identification number is recorded on forms filed with the state and federal government.The Employer Identification Number is issued by the Internal Revenue Service. Federal Form SS-4 must be completed to have an EIN assigned to your business. You can get the Form SS-4 at a local Internal Revenue Office, online at www.
irs.gov, or from the 800 telephone number for the Internal Revenue Service. TaxesEmployers register for Employer Withholding Taxes and for Unemployment Compensation Insurance Tax. Withholding taxes usually include state and federal income tax, FICA, and Medicare.
Federal and state unemployment taxes are based on a percentage of the employees’ gross earnings and are used to compensate employees for loss of wages due to job-related injuries.A sales tax license is required when business owners sell taxable items. The sales tax rate in Pennsylvania is 6 percent. Recordkeeping Seek the advice of an accountant to learn the guidelines for the type of records you must maintain, how long to keep the records, and what information is required for federal and state tax reports.
