Your type of business determines which income tax form(s) you have to file with the IRS. Common business structures are sole proprietorship, partnership, corporations S corporation, and limited liability company (LLC). Legal and tax considerations enter into selecting a business structure.
Sole proprietor - an individual who owns a unicorporated business by him/herself.
Partnership - a relationship whre two or more persons join together 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.
Corporation - a relationship where prospective shareholders exchange money, property, or both, for the coprpration's captial stock. Profits are taxed to the shareholders when distributed as dividends.
S corporation - a corporation, meeting certain criteria, that elects to be treated as a S corporation. Generally an S corporation is exempt from income tax; the shareholders report the S corporation's income, deductions, loss and credits on their individual tax returns.
Limited Liability Company (LLC) - an entity -- statutorily authorized in certain states-that is characterized by limited liability for debts similar to that of a corporation, management by members or managers, and pass through taxation similar to that of a partnership.
Reprinted from IRS Publication 1518.
No comments:
Post a Comment