Sole Proprietorships

Many single owner small business owners set up as a sole proprietorship. It’s the easiest and most inexpensive option, which is why it’s popular. Sole proprietorships don’t have to adhere to as many formalities as a corporation or even LLC.

One of the biggest downsides to a sole proprietorship is the potential liability exposure. Your business is seen as an extension of you, which means your personal assets can be at risk for being attached to cover company debts, liabilities, and obligations.

For taxation purposes, sole proprietorship owners pay their income taxes for the business along with their personal returns; there is no separate filing.

Partnerships

To form a partnership, there must be more than one business owner. Much like a sole proprietorship, partnerships are easy to set up and have minimal upfront costs. It is not a separate legal entity, and faces some of the same issues as a sole proprietorship. Partners pay taxes on their own individual returns, although the partnership still files a return, which is more informational in nature.

Owners are called partners and they are not protected from personal liability or debts of the business. There are some variations of partnerships available in some states that may offer limited liability protection.

Limited Liability Company (LLC)

LLCs are formed under state laws and are one of the newer types of business structure. An LLC is desirable because it combines the liability protection of a corporation and the tax benefits of a partnership or sole proprietorship. The IRS does not recognize an LLC as a separate legal entity, which means the LLC decides how it wants to be taxed. You can opt for sole proprietorship (mandatory if you only have one owner), partnership, or corporation. It’s an example of what is known as a “pass-through” entity.

LLCs are required to use either Limited Liability Company or LLC in their name. Owners are called members and an LLC must either be member-managed, which means everyone has the same right to participate in day-to-day management, or manager-managed, where one or more people are appointed. Partnerships create partnership agreements while LLCs have operating agreements. These are important as they can help avoid member disputes down the line.

Corporations

C corporations are traditional corporations and what most people think of when they hear “incorporated.” They provide personal liability protection, but they also cost the most to setup and maintain. Owners are called shareholders and own stock in the corporation. There are specific requirements that must be met, including designation of officers, annual meetings, and strict record keeping.

There is also an issue with double taxation as the corporation is taxed on its income and then shareholders are taxed on dividends. There is a newer IRS designation called the S corporation that alleviates the double taxation issue, but the requirements are very strict. For example, all shareholders must be domestic individuals, you cannot have more than 100 shareholders, and you can only issue one class of stock.

Retaining a Small Business Lawyer

The attorneys at Tobin O’Connor Concino P.C. in Washington DC have years of experience assisting small business owners with a variety of legal matters. Contact our office at 202.362.5900 to schedule a consultation and let us help with all your small business needs.

If you’re running a small business, there’s a chance you are missing out on a number of tax deductions. Some of these include:

Self-Employment Tax

Wages are subject to FICA tax, which is comprised of Medicare and Social Security taxes. When you’re employed by someone else, these are deducted right from your payroll. However, when you are self-employed, you are responsible for both the employer and employee portion yourself. Fortunately, there is deduction for the equivalent of what an employer would pay.

Health Insurance

You may have a deduction for health insurance, including Medicare premiums, that you pay for yourself, along with spouse and dependents. To qualify, you must show a net profit for the year on your Schedule C, C-EZ, or F, and the insurance plan has to be under your business. If you qualify, you can deduct the premiums on your tax returns.

Business Insurance

If you have business-related insurance, like malpractice insurance, general liability, workers compensation, or errors and omissions insurance, you may be able to deduct premiums. You can also deduct premiums for insurance used to cover your business location in the event of theft, fire, storm, etc.

Vehicle Expenses

You may be able to deduct a portion of your vehicle expenses, including the lease payment, provided you use the vehicle exclusively for your business. Most people split the vehicle between business and personal use, which means you can only claim the portion attributed to work. You’ll need to keep detailed records, especially if you plan to claim parking, gas, repairs, mileage, etc.

Promotion and Advertising Costs

Businesses have the right to deduct expenses for getting the word out, which can include traditional print advertising like a newspaper or magazine, but also business cards. In many cases, you can also deduct the costs associated with preparing your advertising, like graphic design, website costs, hosting fees, and more.

Home Office

If you work from home, you may have a deduction for your office. However, this deduction is often misused, leading to IRS audits. To deduct any home expenses, the portion attributable to the business must be exclusively used for work and be your principal place of business. Maybe you meet clients there, see patients, or manufacture products. It must be a separate office, not just the spot in your home where you find it convenient to work.

Legal Fees and Other Service Fees

It’s important to have a Washington DC small business attorney you can trust. You may assume that a small business doesn’t require legal services, but small businesses are the ones who often run afoul of employment laws and other statutes. Fortunately, your legal fees, along with other important service fees, are deductible. These can be for a tax accountant, payroll services, and consultants for example.

There are a number of other deductions a small business is eligible for. The attorneys at Tobin O’Connor Concino P.C. have experience handling a variety of small business needs, including new business set up, compliance issues, and tax planning. Contact our office at 202-362-5900 to set up a consultation.

What is a Trade Name?

A trade name is essentially any name that you use in your business operations that differs from the full legal name of the business. This involves filing a trade name that shows a DBA, which stands for “doing business as.”

When do you need a Trade Name?

If you use any business name that deviates from your legal name, you’ll need to register it as a DBA. For example, if your name is Mary Richards and you want to do business with any variation of that, such as Mary Richards’ Marketing Agency, then you’ll need to file that trade name so people know you’re doing business under this fictitious name.

The need for a trade name doesn’t just apply to sole practitioners either. If you have a corporation or LLC and you want to do business under another name, you’ll need to register a DBA as well.

Is a Trademark the same as a Trade Name?

No. Some people mix these up; however, they are entirely different things. As explained herein, the trade name is an official name that a company conducts business under. It does not afford any brand protection or allow for unlimited usage rights. A trademark is what you file to protect your brand name, and is often linked to your trade name. Trademarks can protect more than a name; it can be used for slogans, symbols, and logos as well.

If you haven’t filed for a trademark and the usage of your brand name is perceived as a trademark, you may in fact be infringing on someone else’s existing trademark.

Important Items to Keep in Mind When Choosing a Trade Name?

When you’re choosing a trade name, there are a few important things to keep in mind when filing a DBA in Washington, DC.

• Your trade name cannot be the same as your corporate name.
• Your trade name must be different from any other organization name or another registered trade name.
• You cannot use LLC, LP, Corp, etc., in your trade name. The only exception is the word “company,” which is permitted.
• You can register additional trade names, as there is no limit.
• If you register your trade name in the District of Columbia, it is only valid for business conducted within Washington, DC. If you plan to do business in another jurisdiction, you’ll need to register the name there too.

Retaining a Small Business Attorney

If you’re starting a new business, retaining the services of a skilled Washington DC small business attorney can help you through the process. If you need assistance with setting up and registering your new business, want to apply for a trademark, or have another pressing legal matter, the attorneys at Tobin O’Connor Concino P.C. can help with all your small business needs. Call our office or use the contact form on our website to schedule an initial consultation.

Resources:

sba.gov/blogs/difference-between-trade-name-and-trademark-and-why-you-cant-overlook-either

dcra.dc.gov/service/register-trade-name