[...]... Insurance, as I explain in Section A3 , below, and in Chapter 11, can provide a suitable umbrella when creditor problems rain on your crafts business Although insurance coverage will add to your 1/4 YOUR CRAFTS BUSINESS ongoing costs, the addition will be regular and predictable, as opposed to the limitless costs that a natural disaster or a lawsuit could generate Example: Jack’s pewter business has sufficient... can operate a business as a sole proprietorship In other words, they report the business income on their joint return using a Schedule C The spouses can also operate as a partnership However, if the couple plans to file a joint return anyway, there are no tax advantages to operating as a partnership If spouses file separate returns, there may be tax advantages Check with your accountant or tax preparer... status You get the limited liability advantages of a corporation and the tax advantages of a partnership But wait, isn’t that what an LLC is supposed to provide? Yes, and compared to S corporations, LLCs do it better and with less formality For example, a one-person S corporation must file a federal and state corporate tax return A one-person LLC only files a Schedule C with the individual return (An... cooperative structure is not a distinct legal business form like the partnership, corporation or LLC In other words, it’s not enough to band together and call your business a cooperative Cooperative members must also adopt a traditional business form such as a partnership or corporation, and legal help may be needed during the organizing and formation stages Many cooperatives operate informally as partnerships... same is not true in a partnership, where any partner may be individually liable for debts or liabilities of the partnership 1/18 YOUR CRAFTS BUSINESS Just as with any incorporation, the cooperative must file articles of incorporation with the state government and must prepare bylaws (establishing voting, equity, refunds and retained capital for each member or “patron”) Again, each state’s laws may... with more than one person can file a fairly simple partnership Form 1065.) Similarly, an S corporation—like a C corporation—must file and pay employment taxes on its employees In addition, the S corporation has none of the “retained income” advantages of a C corporation All in all—and your accountant can provide further advice—it makes sense to choose an LLC over an S corporation C Forming Your Business... Description of Property Value $ $ $ $ Partnership Agreement (Page 1) YOUR CRAFTS BUSINESS 1/10 Capital Accounts The partnership will maintain a capital account for each Partner The account will consist of the Partner’s capital contribution plus the Partner’s share of profits less the Partner’s share of losses and distributions to the Partner A Partner may not remove capital from his or her account without the... days after that Partner’s withdrawal or death, will pay the withdrawing Partner or the deceased Partner’s estate: [Choose one] the amount in the capital account of the withdrawing or deceased Partner as of the date of withdrawal or death the fair market value of the interest of the withdrawing or deceased Partner as determined by the partnership’s accountant other: General Provisions Entire Agreement... filing a document, called articles or certificate of organization, with the state’s corporate filing office, usually the Secretary of State The owners (known as members) can manage the business or designate others to do so In general, there is far less formality to maintaining an LLC than a corporation YOUR CRAFTS BUSINESS 1/16 Business Forms: Pros and Cons The table below summarizes the advantages and... rent, you’re liable for the missing payments; if you wreck your rental car, you’re liable for damages You and your attorney may be able to negotiate changes to some agreements that shift or lessen your liability Example: Andrew is licensing his crafts doll design to a toy company He receives a $20,000 advance, but the license agreement states that Andrew must refund his advance if the company is sued .