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BUSSINESS TYPES IN PEACHTREE ACCOUNTING



Choosing a bussiness type in peachtree accounting is as good as choosing the type of chart of accounts you want to use, the bussiness type you choose actually determines the kind of chart of accounts peachtree will present to you. Below are the details of the bussiness types we have in peachtree.

Corporation: This is a business that is owned by a few persons or thousands of persons and is incorporated under the laws of one of the 50 states. It is a body formed and authorized to act as a single entity and is legally endowed with various rights and duties including the capacity of succession. When you select the Corporation business type during New Company Setup, the following equity accounts are automatically set up:
Common Stock (Equity – doesn't close)
Paid in Capital (Equity doesn't close)
Retained Earnings (Equity – Retained Earnings)
Dividends Paid (Equity – gets closed)
In a corporation, you cannot touch equity except to pay dividends or sell stock. You may need to set up a Preferred Stock account if you differentiate between Common and Preferred. In addition, you may require a Paid-in Capital account for stocks sold at temporarily higher prices. If there are not too many shareholders in your company, you may want to set up subaccounts per shareholder for the Dividends Paid account. Or you could use the department-masking feature for this same purpose.

S Corporation: This is a type of corporation that, for federal tax purposes (in most states), may be taxed as a partnership provided certain requirements are met. There are certain limitations that restrict this election typically to small businesses. These are limits on the number of shareholders, the types of shareholders, the classes of stock issued, and other restrictions. Consult your tax accountant if you're considering a switch to this form of business. When you select the S Corporation business type during New Company Setup, the following equity accounts are automatically set up:
Common Stock (Equity – doesn't close)
Paid in Capital (Equity doesn't close)
Retained Earnings (Equity – Retained Earnings)
Dividends Paid (Equity – gets closed)

Partnership: This is a business owned by two or more persons associated as partners. The partners have joint control over operations and the right to share in profits.
When you select the Partnership business type during New Company Setup, the following equity accounts are automatically set up:
Retained Earnings (Equity – Retained Earnings)
Partner's Contribution (Equity – gets closed)
Partner's Draw (Equity – gets closed)
Note that all equity gets rolled into Retained Earnings at year-end. Everything you add increases Partner's Contribution; withdrawals decrease Partner's Draw. While your tax software typically does the allocation of equity among partners, there are two ways to track this in Peachtree.

Sole Proprietorship: This is a business owned by a single individual and often managed by that same individual. A person who does business for himself or herself is engaged in the operation of a sole proprietorship. Many small service businesses such as doctors, lawyers, barbers, electricians, and small retail establishments are sole proprietorships. This is the simplest form of business. The owner is the business. When you select the Sole Proprietorship business type during New Company Setup, the following equity accounts are automatically set up:
Retained Earnings (Equity – Retained Earnings)
Owner's Contribution (Equity – gets closed)
Owner's Draw (Equity – gets closed)
Note that all equity gets rolled into Retained Earnings at year-end. Everything you add increases Owners Contribution; withdrawals decrease Owners Draw. You could set up a separate account for Charitable Contributions. You could even have an account for Personal Income Tax Deposits, which would help when figuring your taxes. Below are other considerations for sole proprietors:
Keep separate accounts for checking and savings accounts.
Record all draws and contributions.
Record your personal auto mileage.
If you work at home, you're entitled to a home office deduction.

Limited Liability Company (LLC): This is an unincorporated association of two or more persons (partners, corporations, and other business entities) whose members have limited personal liability for obligations or debts of the company. Similar to corporations, a limited liability company shields the assets of owners and investors from liability claims. It is classified as a partnership for federal tax purposes. If the company has more corporate characteristics, it may be taxed as a corporation. And, state taxation varies state by state. When you select the Limited Liability Company business type during New Company Setup, the following equity accounts are automatically set up:
Retained Earnings (Equity – Retained Earnings)
Member's Contribution (Equity – gets closed)
Member's Draw (Equity – gets closed) 
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