Before forming a new business, you must first decide which form of business you want to establish. The type and legal structure of your business also defines the level of control you have on the business entity, required paperwork, as well as tax and other legal liabilities. Most typical business structures are Sole Proprietorships, Partnerships, Corporations, Subchapter S Corporations and Limited Liability Companies (LLCs):
1) Sole Proprietorship: A Sole Proprietorship is the simplest and the most cheapest business form to establish. Sole Proprietorships are generally owned by one person who owns all the assets and also responsible for all possible debts. Read more about Sole Proprietorship.
2) Partnership: A partnership is a form of business where two or more people share the ownership of the business. Read more about Partnership.
3) Corporation: A corporation is a unique and legal entity separate from shareholders who own it. Apart from a sole proprietorship or a partnership, a corporation can be taxed by its own, can enter into contractual agreements, and can be sued. Read more about Corporation.
4) Subchapter S Corporation: A Subchapter S Corporation is a special type of corporation offering avoidance of double taxation. If a business qualifies as a Subchapter S Corporation by the IRS (Internal Revenue service), the corporation is taxed as a partnership, the shareholders of the corporation are liable to pay tax on business profits on their individual tax returns. Read more about Subchapter S Corporation.
5) Limited Liability Company (LLC): Limited Liability Company (LLC) is a new and hybrid business entity providing limited liability to its owners. A Limited Liability Company offers limited liability as in a corporation, and pass-through income taxation as in a partnership. Read more about LLC Limited Liability Company.
Other than business entities above, there are different types of structures like:
6) Non-Profit Corporation: Non-Profit Corporations are structures being in activities of public or private interest like charity or religious activities whose goal are not making profit. A NonProfit Corporation is generally exempt from tax. Read more about Non-Profit Corporation.
7) Cooperative: Cooperatives are business organizations owned and controlled equally by a group of individuals that are using its services or individuals work at it for their own benefits.
The legal name of a business is the name (or names) of person(s) or entity who owns the business. The name of the business can be your name, you and your partner's names, or a fictitious name (Doing Business As) which is different than your name. Read more about Business Name Registration.
Corporations, business partnerships and employers which are hiring employees ought to get an Employer Identification Number (EIN) from the IRS (Internal Revenue Service).
Other than Employer Identification Number (EIN), you also have to get a tax ID from revenue agency in your state. You will also need some kinds of license and permits according to business activity you're involved with. A Sales Tax Permit or a Vendor's License may be one of those license or permits that are needed.
Those are needed for a business for operating in accordance with the law. Business-specific operating permits or a general business license can be provided from your state or local government agency.
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