Business FAQ
Does my business need to be a corporation?
All businesses should be limited liability entities: either corporations or limited liability companies ("LLC's"). A Corporation or LLC shields its owners from personal liability for debts of the business. There are also different tax rules that apply to corporations and LLC's, which may be beneficial to the business owners.
What is a Sole Proprietorship?
A sole proprietorship is an entity with a single owner which provides no liability protection and less tax advantages then other entities.
What is a Limited Liability Company a/k/a LLC?
The LLC is versatile and provides both tax and non-tax benefits. It combines the concept of partnership for tax purposes and corporations for liability purposes. The owners which are called "members" of an LLC have liability protection.
The S-Corporation provides all the liability protection of a C-Corporation but does not pay corporate income taxes. The S- Corporation is also a flow- through entity meaning the individual shareholders report profits and losses on their personal income tax returns.
A C-Corporation is a separate legal entity made up of its shareholders and requires more formalities for its operation than any other business structure. The C-Corporation pays its own taxes at the corporate level and is not a flow-through entity.
What is a Tax ID or Employer Identification Number (EIN)?
An EIN is an Employee Identification Number that is issued by the IRS, which is assigned to an entity and is used to open bank accounts and prepare tax filings for the Company. In a business that does not have a separate entity structure the social security number of an individual is used instead of an EIN.
