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Business Structures

Updated: Jun 28, 2023

Depending on the nature and business structure, entrepreneurs should become familiar with federal, state and local regulations before establishing their business. It is recommended to seek legal, tax and financial advice before starting a business. Factors to consider when electing a business structure: -Capital Investment -Regulations, permits y licenses -Complexity -Flexibility -Control -Tax Treatment -Responsibility

1. Sole Propritor -

May do business as (DBA) under a trade name.

Application for a Trade Name - Allows the owner to take legal action in case someone else copies or misuses such trade name. May register a brand and open a bank account. The owner controls the business and decision-making.

2. LLC (Limited Liability Company)

3. Corporation

4. S Corporation

5. Professional Limited Liability Company (PLLC)

6. Partnership

7. Non-Profit Corporation

Summary of Business Structures, ownership, liability, taxes and required forms:

Business Structure

Ownership

Liability

Taxes

Structure Forms

​Owners Forms

Sole Proprietorship

One person

​Unlimited personal liability

  • At personal level, subject to Self-Employment tax

1040, Schedule C, Schedule SE, 1040-ES, 941 or 943, 944, W-2s, W-3, 940, excise tax (as applicable)

Limited Liability Company (LLC)

One or more person

Owners are not personally liable

​If treated as a disregarded entity, subject to personal tax and Self-Employmen tax. If treated as a corporation, subject to corporate tax

1040 (if single member) or 1065 and Schedule K-1 (1065) if two or more members

​If a Single Member 1040, 1040-ES, Schedule C

​Partnership

Two or more person

Unlimited personal liability unless structured as a Limited Partnership

​At personal level for partners -Subject to Self-Employment taxes (except limited partners)

1065, Schedule K-1 (Form 1065), Employment taxes (941,943, 940), excise taxes if applicable.

​Partners: 1040, Schedule E Part II

C Corporation

One or more person

Owners (Shareholders) not personally liable

​Corporate tax and Shareholders are taxed on Dividends and Interests. (Double Taxation)

​1120, Employment Taxes (941 or 943, 940), Excise Tax, as applicable.

​Shareholders:1040

S Corporation

One or more person, up to 100. All must be U.S. citizens.

Owners (Shareholders) not personally liable

Personal tax level

  • ​1120-S, K-1, K-2, K-3, Employment Taxes (941, 943, 940), Excise Taxes if applicable.

​1040, Schedule E part II

Non Profit Corporation

One or more person

Owners (Shareholders) not personally liable

Need to apply for Tax-Exempt status, but corporate profits cannot be distributed.

​990-N (Gross receipts≤$50,000), 990-EZ or 990 (Gross receipts <$200,000 and Total Assets<$500,000), 990 (Gross receipts ≥$200,00 or Total assets≥$500,000), 990-PF for private foundations.



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