Author: Min Tang

Categories
Planning & Management

Fundamentals For A Hybrid Workplace

Business and employees have all but confirmed that a hybrid working model will become the dominant way of working following the pandemic. Despite a few road bumps, the transition to remote working has been successful, with many businesses beginning to see the potential to regain losses and match their pre-pandemic growth. Similarly, the vast majority of former commuters have embraced the remote working model so strongly that most employees don’t want to go back to the office full time again.

The physical workplace is not dead, however, and will play an important part in rebuilding the economy. Office and remote working can and will exist to produce great results, but this will rely on the right IT investments being made at the right times.

Namely, it is key that we do not repeat the mistakes that defined IT in 2020, in which rushed digital transformation projects traded the short-term ability to work from home, for long-term infrastructure and cybersecurity issues. Equally, businesses cannot simply look to maintain quick fix solutions that may have enabled remote working but may not easily translate into hybrid working.. Optimising the use of technology for hybrid working will require a seamless blend between remote and office work, and businesses will now need to plan for a workplace that is inclusive, flexible, and secure.

Ensuring a connected workplace

With many staff hoping to maintain a certain amount of post-pandemic homeworking, businesses need to ensure that connecting from any location is as smooth as possible, and exchanges with colleagues are seamless. However, the real challenge will come when people are able to meet in person, with others dialling in from afar. If the process is not straightforward and hiccup-free for those dialling in, it can have a serious effect on collaboration among teams, with office and home-workers becoming two separate groups. It can also lead to unequal employee representation, with some people’s thoughts, ideas or opinions being overlooked. Smart meeting rooms will therefore be an important investment for businesses looking to go hybrid.

These intelligent spaces integrate hardware and software to create a productive meeting experience for participants, whether they are joining the meeting from the office or remotely. There are new tools appearing every day to compliment these spaces, such as Microsoft’s employee experience platform Viva, and intelligent collaboration devices such as Microsoft Surface Hubs or Poly Meeting Room solution, which record and take notes during meetings. Effectively linked together, these tools can help create a seamless working environment and eliminate the risk of those staying out-of-office falling behind. In the not-too-distant future, we will see AR and VR integrate into meeting room spaces to take that experience to the next level and give collaboration another dimension. Securing the transition

As businesses swiftly responded to lockdown measures and switched employees to a home working dynamic, so too did cyber criminals, who switched tactics to exploit COVID-19-related fears. Working from home quickly became a gateway to new forms of data theft. In a survey of workers from Deloitte, a quarter of respondents noticed an increase in fraudulent emails, spam, and phishing attempts since the beginning of the COVID-19 crisis. Fraudsters are watching behaviours, devising scams to fit perfectly into the ‘new normal’ – from false Microsoft Teams notifications to Royal Mail scams taking advantage of the increase in home parcel deliveries.

Given the speed with which we had to adapt to home working, it could be forgiven that corporate IT infrastructure was inadequate for a short time while people got used to the new way of working. However, those who are lagging behind with their security infrastructure could pay dearly. For those looking to a hybrid workplace model for the future, staff and data security is paramount.

Creating a security strategy involves several elements, one of which is staff education and ongoing training. With 52% of businesses admitting that employees are their biggest weakness in IT security, comprehensive education of the risks out there and how to spot them is an essential building block to a secure IT infrastructure. This training should be regularly updated to represent the changing conditions of the workplace. Cyber criminals will adapt; therefore, so must organisations and employees. Once a cyber defence has been deployed, it’s then crucial to regularly check that the security measures are effective. In 2020 in particular, many solutions were rolled out under significant time pressures and IT staff now need to evaluate these solutions and adjust them if necessary. If businesses now operate with more cloud-based storage, it’s fundamental to check that is this properly managed and protected from attacks. It’s crucial not to forget to validate the security of service providers, suppliers and partners too. After all, supply chain weaknesses can lead to major cyber and data breaches.

Striving towards greater inclusion

One of the great casualties of the last year has been workplace culture and a lost sense of community among workers. While office culture was due an overhaul, there are concerns that a permanent remote-only way of working will leave some staff excluded and missing the key social element of work. Employee wellbeing and job satisfaction are also more difficult to track when teams are remote. This is where behavioural analytics tools can play a key role, by analysing behavioural patterns to understand employee activity and help ensure remote working is enjoyable and sustainable for everyone.

The insights that are unlocked by this technology will be invaluable in 2021, as they can also provide businesses with insights into employee working patterns. When these tools are combined with data sources, such as networks and smart meeting rooms, this provides business leaders with an all-important overview of employee engagement. From here, it’s possible to evaluate the true feeling of employees and understand if anyone does not feel included, and why. In addition to being separated by geography, some social groups are more at risk from becoming isolated than others, and business leaders must take extra steps to ensure that everyone feels invested in. Technology plays an essential role in this. Armed with the right tools and data, leaders can take effective steps to include staff members in this new way of working.

‘Going to work’ may never take on quite the same meaning as it did before, and businesses leaders must remember that there is not a one-size-fits-all approach that will meet every need. The process of hybrid working will require us all to learn and evaluate our own unique goals and challenges. Like all IT investments, this will also mean that strong foundations need to be laid around security and connection, with the entire team being involved in the process. Eventually, once we’ve hit the hybrid working nail on the head, I think we will all wonder why it was not the norm to begin with.

The fundamentals for a hybrid workplace [Bdaily]

Categories
Legal

Exempt vs. Nonexempt: What Is the Difference?

Learn the difference between hiring exempt and nonexempt employees.

  • Business owners need to properly classify their employees as exempt or nonexempt to avoid legal ramifications supported by the Fair Labor Standards Act (FLSA).
  • Exempt employees must earn a minimum of $455 per week; be paid the same amount of money regardless of hours worked; and perform executive, professional, or administrative duties.
  • Nonexempt employees have no limitations or requirements for the number of hours they can work each week, but they must receive overtime pay if they work more than 40 hours in one week.
  • This article is for employers who are trying to make the determination between exempt and nonexempt employees.

It is an employer’s responsibility to accurately determine whether an employee should be classified as exempt or nonexempt. An employee’s classification as exempt or nonexempt is not a matter of preference or choice – the Fair Labor Standards Act (FLSA) has stipulations that determine and regulate each classification.

To avoid misconduct and legal ramifications, it is important to know which category each new hire falls under. Joshua Gerlick, a doctoral student of nonprofit management and a Fowler Fellow at Case Western Reserve University, said that business owners must carefully design job titles and descriptions that fall clearly into either the exempt or nonexempt category.

“Misclassification of employees is costly, and penalties can be retroactive – potentially back to the beginning of an employee’s date of hire,” Gerlick told Business News Daily.

Although some regulations vary by state, there are some basic rules you must follow when determining how to classify and compensate your employees.

What are exempt employees?

Exempt employees are those who are paid a regular salary, a predetermined amount of money distributed in regular intervals throughout the year. These employees do not qualify for minimum wage, nor do they receive overtime pay. “Exempt” means the employee is exempt from overtime pay. The FLSA regulates which employees are exempt and which are nonexempt.

Key takeaway: Exempt employees do not qualify for minimum wage, and they do not receive overtime pay.

What are nonexempt employees?

Nonexempt employees are those who are eligible for minimum wage and overtime pay calculated at 1.5 times their hourly rate of pay. They are often paid hourly for the precise amount of time worked in a pay period. Those who are nonexempt, and when they are eligible for overtime pay, is subject to federal and state standards.

Key takeaway: Nonexempt employees are eligible to receive overtime pay and minimum wage.

Overtime pay: Exempt vs. nonexempt employees

One of the main differences between exempt and nonexempt positions is compensation. Brian Cairns, CEO of ProStrategix Consulting, said that employees with exempt status must earn at least $455 per week but cannot receive payment for overtime. Nonexempt employees must earn at least minimum wage and are eligible for overtime pay.

“Overtime is paid at time and a half once a nonexempt employee works more than 40 hours a week or on specific holidays,” Cairns said. “This was the basis for the old classification of white-collar versus blue-collar workers.”

Overtime pay rules are set in the FLSA. The baseline is that overtime is paid at 1.5 times the rate of pay for every hour worked above 40 hours in a 168-hour consecutive workweek.

As of 2020, employers can pay bonuses to nonexempt employees on top of their regular pay. The full rules for overtime can be found on the U.S. Department of Labor’s website.

Key takeaway: Exempt employees are not eligible for overtime, while nonexempt employees are eligible for overtime pay. Specific guidance comes from the federal and state level, depending on where your business is located.

How to classify exempt vs. nonexempt employees

According to the FLSA, there are three basic tests you can perform to determine whether an employee should be classified as exempt or nonexempt:

  1. Salary level test: An employee earning more than $35,568 per year ($684 per week) qualifies (but is not guaranteed) as exempt.
  2. Salary basis test: An employee who receives a guaranteed minimum compensation, regardless of the time actually worked, qualifies (but is not guaranteed) as exempt.
  3. Duties test: An employee who meets the exemption requirements of tests one and two must also perform an exempt job duty, which can be one or more of the following:
    • Exempt executive duties: The employee supervises two or more other employees as a regular part of their job.
    • Exempt professional duties: The employee performs intellectual activities that require specialized education and the use of discretion and judgment.
    • Exempt administrative duties: The employee performs support operations for significant matters that require the use of discretion and judgment.

“To be considered exempt, an employee must meet the requirements of all three tests,” said Gerlick. “However, the application of these tests is often complicated, and a business owner should consult with their legal advisor to determine specific applicability to a specific job function.”

There may be some exemptions to these rules, including by profession, industry, or pay structure. Visit the Department of Labor website, or consult a payroll professional for more information.

The U.S. Department of Labor (DOL) updated the federal overtime provisions of the FLSA in 2020. The new standards are as follows:

  • Exemptions to white-collar salaries increased from $455 per week to $684 per week.
  • Up to 10% of the standard salary level can comprise bonuses, incentive pay, and/or commissions.
  • The new compensation requirement for what’s classified as highly compensated employees increased to $107,432 from $100,000.

Key takeaway: According to the FLSA, you can determine if an employee is exempt or nonexempt by salary level, salary basis, and job duties.

Pros and cons of exempt employees

Although the employee classification of “exempt” may seem ideal for some employers, that is not the case for everyone. There are many benefits and drawbacks to hiring (and working as) an exempt employee.

For the employer

Since exempt employees cannot earn overtime pay, Gerlick said that the primary benefit of hiring an exempt employee is the ability to demand a certain level of performance or output while maintaining a fixed budget. However, Gerlick warned that exempt employees typically cost more than their nonexempt counterparts, largely due to the expectation that they will use discretion and judgment in executing their duties.

For the employee

Cairns said the primary benefits of exempt employees include paycheck stability, eligibility for benefits, and standard business hours. However, employees with exempt status generally have less-flexible work schedules than nonexempt employees, and they can’t be paid overtime, even if they work more than 40 hours a week.

Key takeaway: Exempt employees are not owed overtime pay, which helps employers stay within their budget. Exempt employees are also eligible for benefits. However, they have less flexibility in their schedules, and they may work more than 40 hours a week without additional compensation.

Pros and cons of nonexempt employees

Hiring nonexempt employees comes with its own set of benefits and drawbacks for employers and employees alike.

For the employer

Hiring a nonexempt employee offers flexibility for employers, since there is no minimum requirement for how many hours they should work each week. You can pay a nonexempt employee an hourly rate (minimum wage or higher) and schedule them based on your company’s needs.

There are a few drawbacks to hiring nonexempt employees, the primary one being overtime pay for employees who work more than 40 hours a week. You will need to accurately monitor and track employee hours to ensure that they are being accurately compensated for their time. [Read related article: What You Need to Know About the Federal Overtime Rules]

For the employee

Although the most obvious benefit for nonexempt employees is the ability to work overtime and receive proper compensation for every hour worked, Cairns said there are drawbacks that nonexempt employees should know about. Since hours can vary week to week, nonexempt employees may not have a stable or consistent paycheck, their work hours may not adhere to standard business hours, and, in some states, they may not be eligible for paid vacation or sick time.

Key takeaway: Nonexempt employees offer employers flexibility for hours worked, but those who work more than 40 hours a week are owed overtime. Employees receive accurate pay for actual hours worked, but their paychecks may fluctuate as hours worked can vary from week to week.

When to hire exempt or nonexempt employees

When creating job titles and descriptions for your employees, consider which category (exempt or nonexempt) will benefit your company the most. Review what duties you will need to be completed and what type of payment you would like to pay (salary or hourly).

Cairns said that some types of jobs are legally required to be exempt and can only be hired as such. However, for positions that can be modified to fit one category or the other, Gerlick said business owners must decide which is more important: flexibility or expertise.

“Hiring an hourly-wage employee whose duties are nonexempt gives owners the option to adjust working hours according to demand – perhaps scheduling 15 hours for one week and 35 hours the week thereafter,” said Gerlick. “Despite the added cost, hiring a salaried employee whose duties are exempt fixes the labor cost regardless of the required time for the employee to accomplish a given objective.”

As a rule of thumb, nonexempt employees are better suited to hourly, temporary, or seasonal work, whereas exempt employees are more suited to long-term positions with executive, administrative, or professional duties. It is important to differentiate these positions based on the actual duties and then hold your employees accountable to the set guidelines.

Gerlick said a common mistake for business owners is designing a job that qualifies as exempt, but then not allowing that employee to exercise the judgment and discretion commensurate with the job description. This mistake can be very costly to your business: If that employee decides to take legal action, they can use the FLSA to support their claims against you.

“If employers are unfamiliar with the particulars of the FLSA, they should retain competent human resources counsel to review job descriptions and occasionally audit job duties to ensure the applicability of existing classifications,” said Gerlick. “Proactivity is crucial. Issues don’t typically arise until an unhappy employee files a lawsuit.”

Key takeaway: When determining whether to hire an exempt or nonexempt employee, consider the job description, length of the job (temporary, short-term, or permanent), whether the position is part time or full time, and the type of candidate you want to hire.

Exempt vs. Nonexempt: What Is the Difference? [Businessnewsdaily]

Categories
Sales & Marketing

Integrated Marketing Campaign Things To Know

The first part of this series discussed the basics of integrated marketing and how the method blends traditional techniques with digital parts. The previous article looked at how this modern tool combined the elements of more conventional outbound marketing with inbound marketing.

This second installment looks at how to take a step back and watch how these moving parts interact by looking at a few hypothetical campaigns that bridge the gap between cyberspace, print, radio and television.

Integrated Marketing Campaign Example

Some of the best integrated marketing campaigns encourage customers to support local small businesses. For example, an event promoting small retailers in a place like Pennsylvania could start with a hashtag like #ShopPenn as the fulcrum of the campaign.

YouTube Videos

That twitter hashtag might point to some YouTube videos about specific local businesses in the Pennsylvania area and perhaps even a live event to be held in a public location where shop owners can distribute pamphlets and flyers, all through one centrally organized campaign.

The Sagefrog Marketing Group has long been leaders in the integrated marketing space. Their 2017 B2B Marketing Mix Report highlights the need to use this integrated technique to engage both younger and older demographics.

The survey notes:

  • 55 percent of businesses don’t have a formal marketing plan.
  • The top lead sources have email marketing, social media marketing, public relations and trade show events all sharing space as big drivers for success.
  • Online marketing and trade shows and events have excellent ROI.

Mark Schmukler, CEO and Co-founder of Sagefrog Marketing Group, sees the parts of these campaigns as interrelated and the focus continually shifting.

Pendulum

“I think the whole thing is a pendulum really,” he tells Small Business Trends. “When digital first came along it was so innovative and powerful people thought all the old channels were dead.” He goes on to say that while digital routes are great for measuring ROI, people are looking to drive revenue too and that’s where these more traditional tools come in.

There are more than a few examples that prove Schmukler’s point. Narrowing the focus helps to get the message out across different channels to your target market. Not everyone needs to be on Facebook or Pinterest. Deciding what’s right for your business and target market is critical.

Therefore, it stands to reason a good marketing communications mix might have several elements like:

  • A press release.
  • Product giveaways on social media that tie in with a series of limited coupons.
  • A website that’s updated with new offers.
  • Demos and events where your product or service gets demonstrated.

What is an Integrated Marketing Campaign? [Smallbiztrends]

 

Categories
Business Trends

Is Blogging Effective?

With the rise of social media, live video, podcasting, and other digital marketing trends, it’s easy to feel as if blogging has lagged behind. But even in a world where there are “sexier” options, blogging still has a placeat the table.

The Benefits of Blogging

Blogging has been around since the dawn of the internet. And though it has experienced some evolution over the years, it’s largely remained the same. Other trends have come and gone, yet the blog has continued to serve as the backbone of any legitimate digital content strategy. Even in 2021, when there are plenty of other ways to create content, blogging continues to yield numerous benefits. This includes:

  • SEO. Most business websites have no shot at ranking on the first page of Google for key search terms. And in 9 out of 10 situations, it’s because they have no content. They have a home page, about us page, contact page, and possibly a couple of product pages – that’s it! By creating a blog where you regularly publish rich content that’s full of natural keywords and language that your customers use, your website instantly becomes stickier for the search algorithms and increases your chances for ranking.
  • Customer education. A blog gives you an opportunity to educate your customers about complex topics, technical components, or big issues that are occurring in their lives and/or your industry. It’s a simple and organic way to educate without pretense.
  • Lead generation. A blog is an excellent lead generation tool. You can use it as an entry point into the website and then get people to opt-in via a subscription form connected to a lead magnet.
  • Monetization. While it won’t happen immediately, you can actually reach a point where you’re able to monetize your blog through ads. You probably won’t get rich, but you might eventually make enough off your blog to offset the content creation costs.
  • Authority. A blog is an excellent authority builder. Despite how easy it is to launch a blog, people perceive it as a status symbol. Much like authoring a book or podcast, writing for a blog gives you this level of authority that people respect.
  • Skill development. Starting, managing, and growing your blog will require you to wear a bunch of different hats (at least initially). And through this process, you’ll acquire and refine a number of valuable skills that can be leveraged in other areas of marketing and business. This includes things like keyword research, basic SEO, WordPress, conversion copywriting, and lead funnels.
  • Discipline. Blogging doesn’t generate overnight results. It’s something you have to stick with for several months and years. And in a world that’s defined and directed by instant gratification, there’s something to be said for cultivating discipline.

When you add all of these benefits together, the power of blogging becomes clear. It doesn’t matter what year is on the calendar, blogging will continue to yield significant benefits for those who commit to doing it the right way.

Is Blogging Still Worth It? [Smallbusinesstrends]

 

Categories
Legal

Pros & Cons of an LLC

Forming a limited liability company can be the perfect strategy for a business. There’s areason that it’s been the most common business entity in the US for the past 20 years.

One of the main reasons that a business or a group of people, form LLCs is to protect personal assets. Just as it sounds, there’s limited liability for owners of the business. It’s hands-off for the property they personally own.

As with every decision made for businesses, there are many more things to consider before taking this step. Of course, paperwork is involved. There may be tax implications that are advantageous, or not. There are different types of membership structures.

You can’t think about those considerations until you’ve gathered information. That way you can make comparisons and determine what’s best for you.

You can weigh the advantages and disadvantages, and see if the pros outweigh the cons. Or vice versa. For each individual business, there’s a business structure that is right for it.

What is a Limited Liability Company?

LLC’s limit the personal liability of business owners or partners. It protects their assets. It is a business structure that can have one owner, such as a sole proprietor, or any number of members.

LLC’s are taxed in a special way. When the owners file tax returns, business income is passed through to become part of the owner’s income. You can make money or lose money. If you need expert advice, you can seek help creating an LLC by using a website like CorpNet.

The Pros of an LLC

So, what can you do with an LLC? We reached out to Nellie Akalp for expert input about LLCs as a business strategy. Akalp is the CEO and Founder of CorpNet.com.

Akalp said that there are many advantages to setting up an LLC as opposed to operating as a sole proprietorship. In many cases, an LLC is the best choice.

“The main pros, in my opinion, are protecting personal assets, tax flexibility and gaining credibility,” Akalp said. “Since an LLC is its own legal entity if someone sues the company or it gets into financial debt, the owner’s assets are generally protected.”

“To maintain that asset protection, it’s essential that the owners keep personal and business activity and finances separate, they avoid engaging in fraudulent activity, they pay their taxes and filing fees onetime and they stay up to date on all compliance formalities needed to keep their LLC in good standing,” she added.

Akalp also went into more depth about tax flexibility and business credibility.

Tax Flexibility

“By default, an LLC is considered the same tax-paying entity as its owner,” Akalp explained. “Income and losses pass through to the owner’s personal tax return and profits are subject to self-employment tax.”

“Online Sole proprietorships, LLCs, however, may elect to be treated as an S Corporation which can lead to tax savings in some situations.”

Business Credibility

“Having an LLC behind a company name may make it look more professional to prospective clients, vendors, partners and investors,” Akalp said. “Many people perceive ‘LLC’ behind a company name as having a business that is more capable or professional.”

Here is more info about the benefits of having a limited liability company:

Simplicity

Filing LLC documents or paperwork is simple with fill-in-the-blanks forms at Secretary of State websites. You need a separate bank account and credit cards.

Limited Liability Protection

Limited Liability means an owner is protected from losing personal assets.

Flexible Membership Numbers

You can form a single-member LLC or have two or more members. There is no limit to members.

Fewer State-Imposed Compliance Requirements

State requirements are clearly defined. Basically, you need Articles of Organization, an Operating Agreement, and a Registered Agent.

Tax Advantages

The LLC has pass-through taxation at the business entity level. That means that you bypass corporate income tax. The profits or losses are reported within the business owner’s personal income tax filing.

Credibility of Having a Limited Liability Company

Having the LLC as part of the business name makes a statement. It adds credibility to the business name as a business that has a formal structure.

Deductions on Healthcare

The LLC can deduct the cost of medical insurance for employees who are not members of the LLC. If the LLC is set up to run and be taxed as an S Corp, the owners can take personal income tax deductions on premiums that are paid. If you’re a single-member LLC you can deduct the cost of your individual health insurance.

Flexibility of Management Structure

The LLC can be manager-managed or member-managed. The number of LLC members is unlimited.

Revenues for Members

Revenues for members can be placed into a living trust. The living trust can be a “member” of the LLC. Remember that a trust is a legal document that establishes ownership over assets, using a grantor and trustee. If the grantor dies, the monies in the trust can be transferred to the trustees, avoiding the probate process.

Ease of Cash Distribution

Members or owners can take money from the company profit account. They can do this in lieu of having a salary.

Deduction of Losses

If the LLC loses money, the loss can be deducted as a business loss on the personal tax return. It can help you save money on taxes.

The Cons of an LLC

Is an LLC best for you? There are also downsides to creating an LLC. As a business owner, it’s time to start a list, pros, and cons LLC.

“Generally speaking, no there are no limits of protection for an LLC,” Akalp said. “However, for maximum protection one may want to consider a corporation.”

“The LLC is more of a hybrid of a corporation and sole proprietorship,” she explained, “While still offering great asset protection as long as the LLC is in compliance, the corporation does go a step further – So really it would depend on the type of business and liabilities associated with that business.”

Here’s a look at the cons:

Ongoing Costs

Annual reports must be filed, along with renewal filing fees, which can be high. The fees vary from state to state. If there are any changes to infrastructure, the entire LLC business entity may need to be refiled.

Difficulty Transferring Business Ownership

A transfer of owners may require unanimous agreement from all members. The way LLC business ownership is to be transferred is spelled out in the LLC Articles of Organization.

Separate Personal and Business Records

Profit or loss from the LLC must be reported on the owner’s or owner’s personal tax return. All business records related to the LLC must be kept separately. The business should have a separate bank account and credit cards.

Limits to LLC Protection

Although personal assets are protected, owners or members of an LLC can be held accountable for business losses. Business assets can be at risk. This can happen if a member gives a personal guarantee for a business loan or debt. Protection may be limited by the bad acts of an owner or member – such as a member who commits fraud or a crime against the LLC, or if a member personally damages an individual.

Limited Options for Investment

The only way someone can invest in the LLC is by becoming a contributing member or becoming an owner. An LLC can’t issue shares.

Exposure of Profits to Social Security and Medicare Taxes

If the LLC earns a profit, that amount will be added to the owner’s income on tax returns. Social security and Medicare taxes will be assessed.

State-Level Restrictions

An LLC is regulated by state statute.

Pros and Cons of an LLC vs Corporation Business Structure

Here’s a quick look at the advantages and disadvantages between each type, an LLC and a Corporation (Inc.) business. What’s the difference?

First, a definition of a Corporation also called a C Corporation. A C Corporation is a legal structure in which the shareholders, are taxed separately from the C corp.

C Corps are the primary kind of Corporation. There are also S corps. To learn more about an S corporation, see below.

Pros of an LLCs vs Corporation

Profits are reported on the owner’s tax returns and taxed at the owner’s tax rate (self-employment tax rate).

The management structure is set up as desired in Articles of Organization.

LLC is owned by members.

Cons of an LLCs vs Corporation

Corporation profits are subject to corporate tax rates. C corporations are subject to double taxation. The C corp is subject to corporate income taxation. The income of a C corporation is also passed through to shareholders, who are taxed. The C corp pays taxes on earnings before the earnings are distributed to shareholders as dividends. The dividends can be reinvested in the company at a lower corporate tax rate.

Corporation business structure must have a board of directors, officers, and shareholders. The board of directors is voted on by shareholders. There must be annual meetings.

The corporation is owned by shareholders.

A C corporation can also limit the liability of investors. The most an investor can be liable for if a C corporation fails is the amount the person has invested.

 

Pros and Cons of an LLCs vs S Corps

Here’s a quick look at each type, with advantages and disadvantages for small business owners. What’s the difference between an LLC and S-Corp?

First, let’s differentiate between an S Corp and a C corp. An S corp may also be called an S subchapter.

S corporations have to meet specific IRS guidelines that make them different than a C corp:

  1. The S corp must be incorporated domestically.
  2. S corporations can have only one kind of stock.
  3. S corporations can have no more than 100 shareholders.
  4. The shareholders in S corporations can NOT be partnerships, corporations or nonresident aliens.

If each of those guidelines is met, the S corporation may pass income (or losses) directly to shareholders. The S corp can pass income to shareholders without paying federal corporate taxes.

In other words, the S corporation qualification gives the business the benefits of corporation. And one of the S corporation benefits is that is enjoys exemption from federal taxes.

Shareholders of an S corp must report income or loss on individual tax return documents.

Pros of an LLCs vs S Corps

  • LLCs have unlimited owners. Membership interests are important.
  • LLCs have flexibility on how business is set up and run.
  • LLC’s profits are taxed on an individual tax return.

Cons of an LLCs vs S Corps

  • S corporation must be organized with a board of directors.
  • S corporation has strict rules about required meetings and records of meetings.
  • The state filing fees for S corporations are higher than LLC state filing fees.
  • S corporations can have shareholders who are individuals, specific trusts or estates, or tax-exempt organizations.
  • S corporation shareholders are taxed on profits received from the S corporation as part of income taxation. The S corporation earnings are taxed (double taxation).

Pros and Cons of an LLC vs Sole Proprietorship

Are LLCs a good option for a sole proprietor? What are the tax requirements? Tax liability? If you’re self-employed, should you form an LLC?

The short answer? If you need liability protection, consider an LLC. Liability protection is the number one reason for forming an LLC, whether it’s a sole owner or unlimited owners.

Here’s a quick look:

Pros of an LLC vs Sole Proprietorship

With an LLC the sole owner’s personal assets are protected.

A sole owner LLC can be taxed on LLC profit on personal tax return as taxable income, not subject to self-employment taxes.

Easier to separate business and personal accounts, since an LLC requires a dedicated bank account.

A loss from the LLC won’t affect your personal credit score.

Cons of a Single Member LLC vs Sole Proprietorship

As a sole proprietorship, you can be held responsible for liabilities.

A sole proprietorship must file a Schedule C for profit and loss and pay self-employment taxes.

Paperwork must be filed, with fees, as per state regulations. You must file Articles of Organization and Operating Agreement, along with required fees.

Is A Limited Liability Company a Good Idea?

Well, yes and no. It depends on your business goals and your preference for business structure.

You must weigh the pros and cons and decide if an LLC is the best option for you. It’s not the best option for all businesses.

But for many businesses, the choice to form an LLC is as simple as the need to protect the personal assets of an owner or owner. In those cases, forming an LLC for tax purposes is a secondary reason.

Here are the main reasons a business owner would opt to form a Limited Liability Company:

  • Protect Personal Assets
  • For tax purposes.
  • To have flexibility in business structures.

How many owners can an LLC have?

A Limited Liability Company can have an unlimited number of members.

Should my business be a Corporation or an LLC?

You could argue that it’s easier for an individual to become part of a corporation by becoming one of its shareholders. And in that way a corporation can grow financially.

With an LLC, you can’t issue shares for shareholders. You don’t have shareholders. Instead of relying on shareholders, you need to attract outsiders who can invest in your company by becoming co-owner or contributing members.

Which one gives you the biggest break on taxes. I think we all know the answer to that one. Although it may seem that corporations or LLCs are getting breaks on taxes, you’ll pay somewhere. No business entities escape paying taxes.

For a definitive answer on which type of entity is best for you, consult a person who is an expert in taxes for businesses.

An LLC has been the most common type of business entity established in the US for the past 20 years. But the primary reason for choosing this type of entity, instead of forming corporations, is to protect assets.

Should I elect for my LLC to be taxed as an S Corp?

As you consider that option, here’s a term that will help: QBI, or qualified business income. QBI is net income, not gross income. And this is important as you consider choosing taxation as an S corp.

Since an s corp is a pass-through entity, you can deduct up to 20% of QBI. In other words, the s corp taxation guidelines allow the owner to take the 20% QBI deduction on business income.

If the LLC is taxed as an S corp, the business owner pays self-employment tax only on employment income.

Do LLCs pay more taxes than sole proprietorships?

A single-member LLC is taxed as a sole proprietorship.

A multiple-member LLC of two people is taxed as a partnership. The partnership files Form 1065 and each member of the partnership files a Schedule K-1.

LLC members are taxed based on their share of the LLC income. Each member must also pay self-employment tax.

 

Pros and Cons of an LLC [Smallbiztrends]