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LLC, Corporation, Partnership: What’s the Difference?

Many new businesses start out as sole proprietorships because this is the simplest form of ownership and requires very little paperwork or expense to start up. But for businesses with multiple owners or those needing outside funding, this usually isn’t sufficient.The three most common forms of ownership are Partnerships, Corporations and Limited Liability Companies (LLC’s). There are other options, but most businesses use one of these operating forms and each has different treatment of taxes and legal issues for the owners.PartnershipThis is a relatively easy form of ownership to set up as it only requires an agreement among the partners, which can be verbal or written. In a partnership, the owners manage and control the business and all revenue flows directly through the business to each partner, each of whom are then taxed based on their portion of the income.The partners are personally liable for debts and any liabilities that result from the operation of the business. When one partner leaves the business, it is dissolved unless there is an agreement in place that allows it to continue.A business continuation agreement will typically stipulate the terms under which a partner can transfer his or her share of the business for some financial consideration. The same agreement should provide for the transfer of a deceased partner’s share so the surviving family receives fair compensation from the remaining partners.Limited Liability Company (LLC)The creation of an LLC requires an operational agreement and a filing of articles of organization with the state. Similar to partnerships, owners of an LLC control and manage the company. The company files an information tax return which reports each owner’s share of the profits, but does not pay taxes directly. The owners report and pay tax on their personal returns based on their ownership share and the profits reported.A primary difference between a partnership and an LLC is that LLC’s can provide limited liability protection for the owners. This helps to insulate the owners from the debts and liabilities of the company. It is becoming a very popular alternative, as it is relatively easy to set up, usually has lower set-up costs than a corporation and avoids issues around dividends and the double taxation of profits that can occur in corporations.LLC’s are governed by the states in which they are formed and this means that the regulations around setting them up may vary from state to state.CorporationCorporations are legal entities that are created by filing articles of incorporation with the state. Corporations provide protection from liability for the owners and do not have any restrictions on who can own shares or the number of shareholders you can have. This is usually the best bet when you have a large number of investors or for a business considering going public somewhere down the road.There is a lot of confusion around the question of Sub-S corporations vs. C corporations. They are actually the same type of entity – the difference is in the way they are taxed. All corporations are C-corporations unless you file and receive approval from the IRS to be treated as a Sub-S for tax purposes. This is called electing Sub-S status. There are limitations on the number and type of owners you can have for Sub-S status, so not all corporations are eligible to file taxes on a Sub-S basis.It is possible to switch from C corporation tax status to S-corporation tax status or vice versa, but there are time limitations about when you can and can’t do so. A C corporation is a tax entity in and of itself, so it files a tax return and the corporation is taxed based on business profits. An S-Corp is similar to a partnership or LLC in that it files an information return (Form 1120S) and then the taxable income flows directly to the shareholder owners in proportion to their ownership.In a C-corporation, an effective “double-taxation” can occur when the corporation pays dividends to owners out of profits which have already been taxed and then the shareholder owners pay tax on the dividend income reported to them.Which Type is Best? There is no right answer to that. This article summarizes key differences based on taxation and liability limitations, but there are many factors including your type of business, whether you are seeking funding, how many owners are anticipated, etc., that need to go into your decision. You can consult with an attorney and tax advisor to make the decision or use a specialty online service to get more information if you wish to do it yourself.Ultimately the form of business ownership selected comes down to the owners’ level of concern over management control, liability exposure, tax issues and business transfer issues. Because of the tax and legal implications involved, it is important to do the necessary due diligence before selecting an ownership form.

Portfolio Management is Risky Business

A friend of mine (we’ll call him Al) was out looking at daycare centers with his wife. Their two year old daughter was ready to expand her horizons and learn the intricacies of social behavior and all the risks inherent in her new world. To Al’s dismay, no daycare center met the standards of control he would have expected in a daycare. This new world was fraught with risk. Doors weren’t locked and children could escape. Gates were not on the stairwell and children could fall and injure themselves. Peanut butter was in the fridge and children could access it. Al wasn’t willing to run the risk of introducing his daughter to this environment. Oddly enough, Al didn’t have similar controls in his own house. No childproof door locks, no stair gates, and peanut butter in his fridge – sometimes on the counter!!It was clear to me that a person will hold an unknown environment to a higher level of scrutiny than a person who is familiar with the same environment. It also became clear that a person’s experience will determine the amount of risk they are willing to tolerate. For example, if I put three people in Al’s deficient daycare and put a jar of peanut butter on the counter, the first person with no children may shrug their shoulders. The second person with a child may say, “Maybe we should remove the jar of peanut butter.” While the third person who has a child with a peanut allergy may say, “I need a peanut free environment for my child. This is unacceptable.” This dependency on individual experience and individual risk tolerance becomes a greater issue to organizations. When trying to ascertain the level of risk inherent in a project portfolio at an enterprise level, it is difficult to compare like with like without a risk management process and model that will represent the enterprise’s willingness to accept risk.The ProblemRisks that are not identified cannot be assessed. While an organization is dependent on a project manager to identify risks associated with a point in time project, there is no clear way to determine inherent risks to the organization. Organizations that have made the move to portfolio management have been successful at time management, resource management and time and budget status reporting at the portfolio level. While each of these advancements is a major achievement on its own, an organization that makes decisions on this data does so without a sense of risk associated with the performance of the portfolio. Decisions get made and risks are reacted to. Many issues are created due to unforeseen risks.So what is wrong with this picture? After all, risk is an accepted part of business and life for pretty much everyone.Risk is inherently a function of value and as such the more value at stake the more risk one is exposed to. Therefore, the notion that risk is a negative situation to be entirely avoided is a flawed argument, as this can only be guaranteed if/when an organization invests in cash cow initiatives where high value can be attained with no risk. We all know that cash cow initiatives are not sustainable and are the exception, not the rule.The ultimate argument is found in the financial market where stocks and bonds are valued by level of risk tolerance. Bonds are considered safer bets and therefore yield lower returns while stocks are considered risky investments and are expected to yield higher returns. Over the past 100 years the financial market has designed numerous mechanisms to manage the dynamics of risk and reward with continued lessons learned along the way.Independent of industry, size and source of funding (i.e. capital market, private equity, tax dollars), organizations must be well versed in balancing risk and reward if they are to survive and succeed in the competitive and volatile economy of the 21st century.With Risk Comes OpportunityThe old saying that “the apple does not fall far from the tree” rings true when one takes a moment to reflect on why risk management practices are at such an elementary level. The answer lies in what organizations have come to believe to be good project management.So what happens to managing risk? Risks become issues, issues become actions, and actions get managed using the same project management processes designed to manage the value line. The problem is that project management practices designed to deliver value are based on nomenclatures such as deliverables, milestones, performance indicators, quality, timeline, budget, approval, benefit realization, etc. These notions work perfectly for the value line where the lingo describes value-based characteristics.To manage risks, organizations need to invest in elevating their risk management practices to the project portfolio level, to attain the same level of maturity as project management practices. Otherwise, risk management will continue to be at the mercy of an individual project manager’s experience and will be managed well by a few and missed by most. This key concept drives the requirement for organizations to baseline their risk tolerance and provide their project management team with a consistent set of risk management standards and practices. Absence of risk management standards and practices will result in an environment of inconsistent risk tolerance and management, since project managers’ personal tolerance for risk will driver their approach for managing project risk. The danger of such a notion is that some project managers will have high tolerance for project risks while some will have lower tolerance, which might or might not be applicable to the priorities of the organization.We have all come to appreciate the necessities of standardized project management tools and methodology, and there are very few organizations that allow a project manager to use his/her own favorite project management tool and methodology. Risk management is no different, and organizations need to invest the same level of diligence in their risk management practices as they do in project management practices.The FrameworkThe identification of potential risks within a project portfolio is of major importance to a proactive risk assessment process. It provides the opportunities, indicators, and information that allows for identifying all risks, major and/or minor, before they adversely impact an organization. An aggregate view of project risks within a portfolio will provide organizations with a holistic assessment of all risks, provided that the risk identificationframework at the project level is comprehensive.The first step in risk assessment is to clearly and concisely express the risk in the form of a risk statement. A risk statement can be defined in the following terms:o The risk assessment statement outlines a state of affairs or attributes known as conditions that the project members feel may adversely impact the project.o The risk assessment statement also articulates the possibility of negative consequences resulting from the undesirable attribute or state of affairs.o This two-part formulation process for risk assessment statements has the advantage of coupling the idea of risk consequences with observable (and potentially controllable) risk conditions.When formulating a risk assessment statement, it is helpful to categorize the risk statement within categories that best reflect the priorities of the organization. The project portfolio Risk Registry (Table 1) outlines the risk statement associated with “strategy” risk category. The project portfolio Risk Registry will have most value when customized to reflect organization risk categories and corresponding risk statements.Once the project portfolio Risk Registry is vetted to reflect business priorities and challenges, the risk statements need to be evaluated against the probability and impact of actualization. The variable chosen to measure probability and impact of risk actualization reflects an organization language, as it is critical that baseline assessment is understood internally and represents organizational risk and exposure.A quadrant analysis of risk category actualization in terms of probability and impact provides the organization with transparent disclosure of risk at the project and portfolio level. This assessment enables an organization to attain a baseline understanding of project portfolio risk based on the organization’s own internal knowledge and experience.The risk analysis model is designed to expand and normalize project management judgment, used in the risk assessment model, and apply a consistent baseline for the probability and impact of all risk categories. It is composed of the following steps:1. Industry sources are used to establish a complete repository of threats that are applicable to the organizations.2. Industry sources are used to determine the organization’s vulnerability to industry threats. Then, the organization uses internal knowledge to narrow the list of vulnerabilities to those most applicable to the organization.3. To further validate the applicability and relevance of threats and vulnerabilities, a processes of “so what” analysis is conducted where the probability and impact of identified threats and vulnerabilities are further validated. The “so what” analysis utilizes metrics similar to the probability and impact metrics used in the risk assessment model.4. COBIT control statements are used to determine the level of controls that an organization has in place or could have in place in order to effectively manage the risk associated with outlined threats and vulnerabilities. Although COBIT controls are mostly designed for IT, indepth testing has revealed that COBIT controls are applicable to both IT and non-IT threats and vulnerabilities.The outcome of the analysis phase is a repository of threats, vulnerabilities and controls assessed and validated through a series of workshops, where project and portfolio managers input is given the same weight as industry best practices. This ensures that the analysis result is applicable to the organization rather than a hypothetical environment.An organization’s risk tolerance is directly influenced by its ability and desire to invest in controls designed to adjust risk tolerance. The action model provides the framework to operationalize risk assessment and risk analysis findings based on the implementation of controls that provide the best level of risk mitigation for project portfolio priorities.The action model leverages “so what” analysis to determine which controls provide the optimal mitigation results for threats/vulnerabilities with the highest probability of actualization and/or most implications. Furthermore, the action model provides the ability to assess the utility of existing controls in order to determine portability/reusability opportunities.The action model also enhances the reliability of the quadrant report produced in the risk assessment and risk analysis phases, and specifically identifies the value of investment in controls as a means to mitigate threat probability and vulnerability impact.In conclusion, the action model enables organizations to improve the effectiveness of processes used to deliver projects through investment in controls. The action model also develops roles, responsibilities and processes required to operationalize the risk assessment and risk analysis models in the form of specific actions. Roles such as Risk Manager and Risk Analyst are defined and incorporated into the business process. Each role in the risk management process has responsibility and accountability, and specific tasks within the risk assessment, risk analysis and risk action model. Finally, the action model enables organizations to establish pragmatic risk management processes.SummaryOrganizations are expected to manage risks and deliver high value capital projects. Anything else is considered sub-optimal performance. Delivering high-value projects requires a project management workforce with significant talent for effectively managing both the value line and risk line.Managing project risk is no different than managing investment risk. In both cases, the “customer” who provides the capital demands that the investment is managed by professionals who understand and leverage risks to maximize return on investment. Failing to do so ends in the “customer” finding other alternatives, as capital investment is a precious commodity.Tools designed to automate risk management become extremely valuable once organizations have understood and implemented the appropriate level of management processes for risk management. Unfortunately, many organizations fall into trap of buying pieces of technology, without having an in-depth understanding of the requirements and processes to use the technology.Organizations have the technology and talent to deliver high value projects through effective and transparent management of risks and need to establish the supporting risk management processes. Start with a framework designed to build an enabling risk management process to manage project portfolio risk relative to organizational requirements. If we can all agree on the tenants of risk in our respective organizations, we won’t have to suffer through miscalculation and mismanagement of risk.After my friend Al communicated his concerns to his wife, they together created a framework to identify acceptable risk for a daycare provider. They discussed why they didn’t hold their own home (the primary daycare) to the same standard. They determined how much they were willing to spend to mitigate certain risks and the likelihood of acceptable risk they were willing to bare. In the end, Al and his wife were able to select a daycare provider that provided the most reasonably safe environment for their child. In addition, they were able to develop a clear picture of some of the deficiencies in their own home environment and addressed them accordingly. The framework was critical in defining the conversation and providing them with a basis for discussion that ultimately enabled them to make an important choice. If only all organizations were run that way.

Day Spa and the Offers For You

When you are looking out for a day spa, the best way to search is to go online and Google the information and check for yourself which day spa helps you get the most out of their deals on offer.Always remember to arrive at the spa at least fifteen to twenty minutes earlier to your appointment, to enjoy the full time booked and so others are not kept waiting. When you arrive at a spa you will be taken to a changing area where you will get a locker to lodge your personal belongings. The spa assistant would first offer you a Spa Robe, and once you wear a spa robe, you will be taken to your treatment room where the therapy begins. Most spas have their rooms designed in such a way so as to put you in a relaxed mood. The rooms would include soft lighting with aroma candles, and a piece of soft music to help you relax and unwind in the cozy atmosphere.Your personal Spa assistant would be with you throughout the session of your spa treatment with you in your personal area. Spa treatments include water therapy, massages, full body wraps, facials, etc. These services can take varying amounts of time. Check with your spa to see if they can also allow you at a good deal to a full day at the spa, with different spa treatments and a healthy lunch as well. Make sure that you voice your concerns to the spa personnel before, during and after the treatments. If you are uncomfortable at any time, you need to speak up right then.Once your spa session is done and over with, you are now relaxed and can go ahead and change your robe. Now remember, usually while paying at the front desk the tips for the therapist’s are usually not included, so it would be wise, however, not mandatory to tip accordingly as deemed fit. If you enjoyed this session of spa treatments, you must now try to make such sessions with your convenience in mind a regular part of your life. Also get your family and friends to experience them as well.People who consider using a spa they often question the “what’s in it for me”, and wonder about the proper etiquette when visiting a spa. It is thus always recommended that you visit a spa for a glimpse before you decide to invest in a spa treatment. This will help you to see for yourself and understand the facilities and learn the different treatments they offer. During the tour, feel free to ask as many questions as possible with regard to how the treatments work and what procedures are followed.If you really need to get to a spa to unwind and relax, make sure you know what your getting into. Always follow the simple rule of the thumb, which would be to do your research and speak to the professionals of the spa you would like to get a service done from. Most of the time people end up at a spa and return not being happy or contented with the services, since expectations were not fulfilled. Don’t let that happen to you, rather when you pay a good deal of money to enjoy a spa experience, so it is important to remember to enjoy and relax the therapy offered.Choose a day when you are free of errands and other obligations, so you can concentrate on the heavenly experience you would be going through. Finally, when you do walk in for that private time and siesta, make sure you arrive at the spa for your session at least a good deal earlier than your appointment time.