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Types of Business Structures for Nursing Agencies: Sole Proprietorships, Partnerships, Corporations, S Corporations, Limited Liability Company (LLC)

Sole Proprietorships

A sole proprietor is someone who owns an unincorporated business by himself or herself. However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation.

If you are a sole proprietor use the information in the chart below to help you determine some of the forms that you may be required to file.




Use this form to -

Schedule A (Form 1040), Itemized Deductions (PDF)


Use Schedule A (Form 1040) to figure your itemized deductions. In most cases, your federal income tax will be less if you take the larger of your itemized deductions or your standard deduction.

Schedule C (PDF) or C-EZ (PDF) (Form 1040) – Profit or Loss from Business


Report income or loss from a business you operated or a profession you practiced as a sole proprietor. Also, use Schedule C to report wages and expenses you had as a statutory employee.

Schedule F (Form 1040), Profit or Loss from Farming (PDF)


Report farm income and expenses. File it with Form 1040, 1041, 1065, or 1065-B.

Schedule SE (Form 1040), Self-Employment Tax (PDF)


Use Schedule SE (Form 1040) to figure the tax due on net earnings from self-employment.

W-2 (PDF)and W-3 (PDF) - Wage and Tax Statement; and Transmittal of Wage and Tax Statements


Report wages, tips, and other compensation, and withheld income, social security, and Medicare taxes for employees.

Form W-2G, Certain Gambling Winnings (PDF)


Report gambling winnings from horse racing, dog racing, jai alai, lotteries, keno, bingo, slot machines, sweepstakes, wagering pools, etc.

Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return (PDF)


Report and pay FUTA tax if your company either:

1. Paid wages of $1,500 or more in any calendar quarter during the calendar year (or the preceding calendar year), or
2. Had one or more employees working for your company for at least some part of a day in any 20 different weeks during the calendar year (or the preceding calendar year).

Form 941, Employer's Quarterly Federal Tax Return (PDF)
or
Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees (PDF)


If you are an employer, you must file a quarterly Form 941 to report:

* Wages you have paid,
* Tips your employees have received,
* Federal income tax you withheld,
* Both employer’s and employee’s share of social security and Medicare taxes, and
* Advance earned income tax credit (EIC) payments.

After you file your first Form 941, you must file a return each quarter even if you have no taxes to report.
Form 944, Employer's Annual Federal Tax Return (PDF)

This form was designed so the smallest employers (those whose annual liability for Social Security, Medicare, and withheld federal income taxes is $1,000 or less) will file and pay these taxes only once a year instead of every quarter.

The IRS will notify those employers who will qualify to file Form 944 in February of each year.

Form 1040 , U.S. Individual Income Tax Return (PDF)


See 1040 Instructions

Form 1096,Annual Summary and Transmittal of U.S. Information Returns (PDF)


Transmit paper Forms 1099, 1098, 5498, and W-2G to the IRS.

Form 1099-A, B, C, CAP, DIV, INT, LTC, MISC, OID, PATR, R, S and, SA (PDF)

Important: Every corporation must file Forms 1099-MISC if, in the course of its trade or business, it makes payments of rents, commissions, or other fixed or determinable income (see section 6041) totaling $600 or more to any one person during the calendar year.

Also use these returns to report amounts received as a nominee for another person. For more details, see the General Instructions for Forms 1099, 1098, 5498, and W-2G.


Report the following:

* Acquisitions or abandonments of secured property;
* Proceeds from broker and barter exchange transactions;
* Cancellation of debts;
* Changes in corporate control and capital structure;
* Dividends and distributions;
* Interest payments;
* Payments of long-term care and accelerated death benefits;
* Miscellaneous income payments to certain fishing boat crew members, to providers of health and medical services, of rent or royalties, of nonemployee compensation, etc.;
* Original issue discount;
* Taxable distributions received from cooperatives;
* Distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts, etc.;
* Proceeds from real estate transactions; and
* Distributions from an HSA, Archer MSA, or Medicare Advantage MSA.

Form 3115, Application for Change in Accounting Method (PDF)


File Form 3115 to request a change in either an overall accounting method or the accounting treatment of any item.

Form 4562, Depreciation and Amortization (PDF)


Use Form 4562 to claim a deduction for depreciation or amortization, to make the section 179 election to expense certain property, and to provide information on the business/investment use of cars and other listed property.

Form 4797, Sale of Business Property (PDF)


Report

* The sale and exchange of:
1. Property used in your trade or business;
2. Depreciable and amortizable property;
3. Oil, gas, geothermal, or other mineral properties; and
4. Section 126 property.
* The involuntary conversion (from other than casualty or theft) of property used in your trade or business or a transaction entered into for profit.
* The disposition of noncapital assets (other than inventory or property held primarily for sale to customers in the ordinary course of your trade or business.)
* The disposition of capital assets not reported on Schedule D.
* The gain or loss ( including any related recapture) for partners and S corporation shareholders form certain section 179 property dispositions by partnerships (other than electing large partnerships) and S corporations.
* The computation of recapture amounts under section 179 and 280F(b)(2) when the business use of section 179 or listed property decreases to 50% or less.

Form 6252, Installment Sale Income (PDF)


Generally, use Form 6252 to report income from casual sales during this tax year of real or personal property (other than inventory) if you will receive any payments in a tax year after the year of sale.

Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business (PDF)


Report the receipt of more than $10,000 in cash or foreign currency in one transaction or a series of related transactions.

Form 8824, Like Kind Exchanges (PDF)


Elect one of the annualization periods in section 6655(e)(2) for figuring estimated tax payments under the annualized income installment method.

Form 8829, Expenses for Business Use of Your Home (PDF)


Use Form 8829 to figure the allowable expenses for business use of your home on Schedule C (Form1040) and any carryover to amounts not deductible in the prior year.

If all of the expenses for business use of your home are properly allocable in inventory costs, do not complete Form 8829. These expenses are figured in Schedule C, Part III.

Note: If you are claiming expenses for business use of your home as an employee or a partner, or you are claiming these expenses on Schedule F (Form 1040) do not use form 8829. Instead, complete the worksheet in Publication 587, Business Use of Your Home.

Form 8849, Claim for Refund of Excise Taxes (PDF)


Claim a refund of certain excise taxes.

Partnerships


A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.

A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it "passes through" any profits or losses to its partners. Each partner includes his or her share of the partnership's income or loss on his or her tax return.

Partners are not employees and should not be issued a Form W-2. The partnership must furnish copies of Schedule K-1 (Form 1065) to the partners by the date Form 1065 is required to be filed, including extensions.

If you are a partnership or a partner (individual) in a partnership, use the information in the charts below to help you determine some of the forms that you may be required to file.

Chart 1 (Partnership)
If you are a partnership then you may be liable for... Use Form...
Annual return of income 1065 (PDF)

Employment taxes:

* Social security and Medicare taxes and income tax withholding
* Federal unemployment (FUTA) tax
* Depositing employment taxes



941 (PDF) ( 943 for farm employees) (PDF)

940 (PDF)
8109
Excise Taxes Refer to the Excise Tax Web page

Chart 2 (Individual Partners in a Partnership)
If you are a partner (individual) in a partnership then you may be liable for... Use Form...
Income Tax 1040 and Schedule E (PDF)
Self-employment tax 1040 and Schedule SE (PDF)
Estimated tax 1040-ES (PDF)

Corporations


In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation's capital stock. A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. A corporation can also take special deductions. For federal income tax purposes, a C corporation is recognized as a separate taxpaying entity. A corporation conducts business, realizes net income or loss, pays taxes and distributes profits to shareholders.

The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This creates a double tax. The corporation does not get a tax deduction when it distributes dividends to shareholders. Shareholders cannot deduct any loss of the corporation.

If you are a C corporation or an S corporation use the information in the charts below to help you determine some of the forms that you may be required to file.

Corporations that have assets of $10 million or more and file at least 250 returns annually are required to electronically file their Forms 1120 and 1120S for tax years ending on or after December 31, 2006. For more e-file information, see References/Related Topic listed below.

Chart 1 - Corporation or S Corporation
If you are a C corporation or an S corporation then you may be liable for... Use Form...
Income Tax

1120 (PDF) or 1120-A (PDF) (corporation)
1120S (PDF) (S corporation)
Estimated tax 1120-W (PDF) (corporation only) and 8109

Employment taxes:

* Social security and Medicare taxes and income tax withholding
* Federal unemployment (FUTA) tax
* Depositing employment taxes



941 (PDF) ( 943 (PDF) for farm employees)

940 (PDF) 8109
Excise Taxes Refer to the Excise Tax Web page

Chart 2 - S Corporation Shareholders
If you are an S corporation
shareholder then you may be liable for... Use Form...
Income Tax 1040 and Schedule E (PDF)
Estimated tax 1040-ES (PDF)

References/Related Topics

*
Other Useful Forms for Corporations
*
Publication 542, Corporations
*
Publication 583, Starting a Business and Keeping Records
*
Business Structures
*
e-file for Business and Self-Employed Taxpayers

Rate the Small Business and Self-Employed Web Site

S Corporations


An eligible domestic corporation can avoid double taxation (once to the shareholders and again to the corporation) by electing to be treated as an S corporation. Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income. On their tax returns, the S corporation's shareholders include their share of the corporation's separately stated items of income, deduction, loss, and credit, and their share of nonseparately stated income or loss.

If you are an S corporation use the information in the charts below to help you determine some of the forms that you may be required to file.

Chart 1 - S Corporation
If you are an S corporation then you may be liable for... Use Form...
Income Tax

1120S (PDF) (S corporation)
Estimated tax 1120-W (PDF) (corporation only) and 8109

Employment taxes:

* Social security and Medicare taxes and income tax withholding
* Federal unemployment (FUTA) tax
* Depositing employment taxes



941 (PDF) ( 943 (PDF) for farm employees)

940 (PDF)
8109
Excise Taxes Refer to the Excise Tax web page

Chart 2 - S Corporation Shareholders
If you are an S corporation
shareholder then you may be liable for... Use Form...
Income Tax 1040 and Schedule E (PDF)
Estimated tax 1040-ES (PDF)
References/Related Topics

*
Publication 583 Starting a Business and Keeping Records
*
Business Structures
*
Form 2553 Election by a Small Business Corporation (PDF)
*
Instructions for Form 1120S (PDF)

Nursing Business Structure, Limited Liability Company (LLC)

A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute.

LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.

Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single member” LLCs, those having only one owner.

A few types of businesses generally cannot be LLCs, such as banks and insurance companies. Check your state’s requirements and the federal tax regulations for further information. There are special rules for foreign LLCs.

For additional information on the kinds of tax returns to file, how to handle employment taxes and possible pitfalls, refer to Publication 3402, Tax Issues for Limited Liability Companies (PDF).

References/Related Topics

* Forms and Publications By U.S. Mail
* Prior Year Forms, Instructions and Publications
* Other Small Business and Self-employed Forms and Publications.
* Other Useful Forms for Limited Liability Companies (LLC)
* Single Member Limited Liability Companies
 

As an entrepreneur, it is your requirement to arrive at essential decisions in the wisest possible manner. One of the things you need to close is the type of business structure you will adapt for your nursing business. Aside from the very common sole proprietorship, partnership and corporation, this article will give you the basics of another business entity—Limited Liability Company (LLC).


A limited liability company (LLC) is a business structure that synthesizes the elements of a corporation and a partnership. Sometimes they termed it as Limited Liability Corporation though this is not the proper term since it is neither a corporation nor a partnership type of business ownership. The owners are called members whose liability is limited only to their total investment on the nursing business. The number of members in an LLC can be at a minimum of one owner up to an unlimited number of members.
Pros of LLC
Limited Liability

The liability of a single member is based only on the amount he or she invested on the company. No members are obliged to pay the company’s debts that unless a personal guarantee is signed.
Flexible Profit Distribution
The profits gained in an LLC can be distributed to its members in any ratio they agreed upon. This gives a limited liability company a great flexibility in matters of profit sharing
No Required Shareholder’s meeting
The operation of an LLC is trouble-free for it is spared from having meetings, resolutions, and formal minutes. This is in contrast with a corporation that requires such meetings.
No Business Tax
Profits are subjected to tax. However, it is not taxed as a business tax but an income tax of every member since each member gains different ratios on the profits.
Cons of an LLC
Easy to dissolve

If corporations still exist with the death of a stockholder, in a limited liability company, if any of the members dies or get bankrupt, the LLC is dissolved.
Opening the business to investors
An LLC will no longer be appropriate in case the members grant shares to employees or when it opens to public investors. If such case is done, a corporate ownership must be adapted.
Further Complications
An LLC business ownership requires more documents to accomplish. For tax concerns, the federal government still needs to classify it as a sole proprietorship, partnership and corporation.
Since states vary from regulations on LLC, you should always check with your state if an LLC is permitted. This writing serves only as a guide for you to make an informed decision about the subjects of LLC. Since the laws in the LLC are diversified with the different states, check with the nearest state office on your area to ask for more information in order to decide the best business entity on your nursing business.

 

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