By default, once you start selling goods or services, you have created a sole proprietorship.

So there's no actual filing requirements and you simply report your business's earnings on your personal taxes.

You may need to file a fictious Business Name (also known as DBA or Doing Business As) if you're creating a business that is different from your personal name.

First form of business entity

Simplest Business form and not a legal entity

Enterprise Owned

Operated by Individual

Once you started selling goods and services --> Its Sole Prop

No Actual Funding Requirements

Simply report business earnings in personal taxes

Is not legally seperate from its owner and it offers no liability protection

Law does not seperate owners personal assets and business obligations

Owners personal assets can be used for debts and liabilities of business (In other words If your business is sued then all your personal assets and properties are under risk)

Accidents happen in any business, such situation is nightmare in sole prop

Can have owner name as business or some fictitious name(trade name)

Famous due to simplicity,ease of use, nominal cost

Need name and secured social licenses to start.

As sole prop has no seperate entity, owner signs the contracts.

checks are written on owners name by customers instead of fictitious business name.

Owners can often do commingle,personal and business property and funds

Has bank accounts in the name of their owner

Sole proprietors do not abserve from audits such as roding and meetings associated with more complex business forms

Sole prop's can bring law suits and can be sued using the name of the owner.

Many business begin as sole prop and graduates to more complex business forms as business develops

Sole prop is indistinguishable from its owner, hence taxation is actually easy.

Income owned by sole prop is income owned by owner.

Fill Schedule C by filling profit and loss along with Form 1040

Final bottom line amount from schedule C is transferred to your personal tax return.

One should also file Schedule SC, along with form 1040 to calculat how much self employment tax you owe.

No need to pay unemployment tax on yourself but you should on your employee

you won't enjoy unemployment benefits should the business suffer.

The owner is subject to unlimited personal liability for business debts, losses and liabilities

Obtaining capital, such as bank loan, can be more difficult - lenders often require a more formal entity structure

Sole proprietorships rarely survive an owner's death or incapcity, so they do not retain value

So proprietorships by definition can only have one owner

Instant,easy and inexpensive

No State paperwork is required for creation

No separate tax filing is required - profits or losses are reported on the owner's tax return

The owner may freely mix business and personal assets

A sole proprietor need not pay unemployment tax on himself or herself (but must pay employee unemployment tax)

Few, if any , ongoing formalities.

All partners share in both the day to day managment and business profits.

A written partnership agreement to form a partnership is highly advised, That lays out all the partners rights and responsibilities is highly rcommended

Partnership agreements are easy ways to set yourself up for disputes in the future

In Partnership agreement, the partners can dictate both the terms of how partnership is managed and how profits and losses are allocated and distributed

A partnership is generally treated as a distinct legal entity separate from its partners.

A key attraction of partnership is that it pays no income tax as income or losses flow through to each partner and are reported on their partners individual tax return

Each partner contributes to all aspects of business including money property labor or skill. In return each partner shares in the profit and losses of the business. Thus there is no liability protection for any of the partners as each partner is jointly and severally liable for any liabilities. That partnership may also be a limited liability partnership.

In general partnership, each is a general partner and each has unlimited liability for the death of the partnership and each has the power to incur obligation on behalf of the partnership within the scope of the partnerships business.

On the other hand limited liability partnerships is a business with more than one owner, But unlike general partnerships limited liability partnerships offer some of their owners limited personal liablity for bsuiness debts

All of the owner of a limited liablity partenrship have limited personal liablity for business debts

Limited liability partnerships may only be formed by the licnesed persons for the practices of public accountancy, law, architecture or engineering

Professsional often prefer LLP's to general partnerships, corporations or LLC because they dont want to be personally liable for their partner's liabilities especially those involving malpractise

LLP protects each partner from debts against the partnership arising from our practice lawsuits against another partner

Owners can start partnerships relatively easily and inexpensively by signing partnership aggreement

No state paperwork is required for creation.

The partnership pays no income tax as income or losses flow through to each partner and are reported on the partner's individual tax return.

Each partner shares in the profits and losses of the business. Thus, there's no liability protection for any of the partners as each partner is jointly and severally liable for any liabilities.

All owners are subject to unlimited personal liability for business debts, losses and liabilities

Individual partners bear responsibility for the actions of other partners

Obtaining capital, such as bank loan, can be more difficult -- lenders often require a more formal entity structure.

Poorly-organized partnerships and oral partnerships can lead to disputes among owners

1. Written Partnership Agreement

2. Have it in writing!

Points

Questions that you need to answer to credit partnership aggrement are

Slowly becoming more as a standard for business is a limited liability company or LLC is a hybrid business form, which combines a liability protection of a corporation with the tax treatment and ease of administration of a partnership.

An LLC is America's newest form of business organization and is the most popular form of Business

The owners of an LLC are referred to as members depending on the state. Depending on the state, the members can consist of a single person two or more people, corporations or other LLC's.

Unlike shareholders in a corporation, LLC's are not taxed as a separate business entity. Instead All profits and losses are passed through the business to each member of the LLC.

LLC members report profits and losses on their personal federal tax returns, just like the owners of the partnership would. In other words, in the eyes of the government an LLC is not a seperate tax Entity. So the business itself is not taxed. Instead all federal income taxes are passed on to the LLC members and are paid through their peronal income tax.

While the federal government does not tax income on LLC. Some states do make sure to check with your state's income tax agency.

Since the federal government does not recognize LLC as a business entity for taxation purposes, LLC must file as a corporation partnership or sole proprietorship tax return.

LLC that are not automatically classified as a corporation can choose their business entity classification, To elect a clasification an LLC must file form 8832. This form is also used if an LLC wishes to change its classification status. (This form is attached).

If you are single member LLC, you need to file form 1040, schedule c like a a sole proprietorship.

If you are a partner in an LLC, you need to file form 1065 partnership tax return like owners in a traditional partnership.

An LLC designated as a corporation needs to file form 1120 which is the corporation income tax return.

The owners of an LLC have no personal liability for the obligations of the LLC.

An LLC is the entity of choice for a business seeking to flow through losses to its investors because an LLC offers complete liability protection to all its memebers

Limited Liability - Owners are not personally responsible for business debts and liabilities. In case of business losses, members personal assets are exempt and are not touched. This is similar to the liability protection afforded to shareholders of a corporation.

Keep in mind that limited liability means limited liability which means that the members are not necessarily shielded from wrongful acts including those of their employees.

Pass - through taxation

LLC's are passed through taxation, LLC's are not taxed as a seperate business entity instead all profits and losses are passeed through the business to each member of the LLC, LLC members reports losses and profits on their personal federal tax returns just like the owners of partnership would.

No restrictions on the number of members allowed

Members have flexibility in structuring the company managment

Does not require as much annual paperwork or have as many formalities as corporations.

More advantages which far outweigh the disadvantages.

If you have a small business or have an online business, LLC is highly recommended.

More expensive to form than sole proprietorships and general partnerships

Ownership is typically harder to transfer than with a corporation.

Limited Life.

In many states when member leaves and LLC their business is dissolved and the members must fulfill all remaining legal and business obligations to close the business. The new members can decide if they want to start a new LLC or part ways, either you can include provisions in your precedent/purdey agreement to prolong the life of the LLC if a member decides to leave the business. Because LLC is a newer business type there is not as much case law to rely on it for determining prcedent.

You can inclued provisions in you

1. Search business name

2. File Articles of Organization of that state

3. Create Operating Agreement of that state

4. Get Employer Identification Number

5. File Statement of Information

6. Search & Apply for Business Licenses and Permits

7. Talk to a business lawyer if you have any other questions.

Corporations are more complex than other business structures because they tend to have costly administrative fees and complex tax and legal requirements. Because of this, corporations are generally suggested for established larger companies with multiple employees. For businesses in that position, corporations offer the ability to sell ownership shares and business through stock offerings

Going public through an initial public offering is a major selling point in attracting investment capital and high quality employee.

A corporations shareholders directors and officers must observe particular formalities in their corporation's operation and administration. For example: management decisions must often be made by a formal vote and recorded in corporate minutes. directives at shareholder meetings must be properly noticed and documented.

Finally, Corporations must meet annual reporting requirements and pay ongoing fee in the state of incorporation and in the states where they are registered to transact business.

C corporations are taxed as a seperate legal entity which means no pass through taxation like a partnership. a business tax return is field and taxes are paid on the corporation's profits.

If the corporation distrubutes profits to the shareholders in the form of dividends, shareholders pay income tax on those distributions. This creates a double taxation of corporate profits.

As with any business type that offers liability protection to the owners a corporation must be created at the state level.

Articles of incorporation sometimes called a certificate of incorporation in their state must be filed and filing fees is paid.

1. File a DBA

2. File Articles of Incorporation with secretary of state.

3. Create Bylaws

4. Get Employer Identification Number

5. File statement of information

6. Search & Apply for business licenses and permits

7. Talk to business lawyer if you have any other questions.

Points

First and foremost corporatin have limited liability

When it comes to taking responsiblity for business debts and actins of a corporation, share holders personal assets are protected.

Shareholders can generally only be held accountable for their investments in stock of the company.

C-corp have separate corporate tax treatment, corporations file taxes separately from their owners.

Owners of a corporation only pay taxes on corporate profits paid to them in the form of salaries, bonuses and dividends. While any additional profits are awarded a corporate tax rate which is usually lower than a personal income tax rate. Also corporations have are attractive to potential employees.

Corporations are generally able to attract and hire high quality and motivate employees because they offer competitive benefits and the potential for partial ownership through stock options.

C-corporations have the ability to generate capital. Corporations have advantage when it comes to raising capital for the business. The ability to raise funds through the sale of stock.

C-corporations could have limited number of shareholders and also ownership is easily transferable through the sale of stock.

Limited Liability - owners are typically not personally responsible for business debts and liabilities

Corporate Tax Treatment - corporations file taxes separately from their owners

Unlimited number of shareholders

Ownership is easily transferable through the sale of stock

Unlimited life, extending beyond owner illness or death

Some business expenses may be tax-deductable

Additional capital can be raised by selling shares of corporate stock.

Time and Money - More expensive to form than sole proprietorships and partnerships.

Double Taxing

Additional Paperwork - face ongoing state-imposed filing requirements and fee.

Face ongoing formalities - holding and properly documenting annual meetings of directors and shareholders.

S-corp is a special type of corporation created through an IRS tax collection

An eligible domestic corporation can avoid double taxation by electing to be treated as an S-corp

To be considered as an S-corp you must first form a business as a C- corp in the state where it is head quartered.

S-corporations are considered by law to be uniqe entity seperate and apart fom those who own it. This limits the financial liability for which you the owner or the shareholder are responsible.

Liability protection is limited, which means that the corporations do not necessarily shield from all litigation such as an employee's tort actions as a rulst of a workplace incident.

What makes the S-corp different than from a traditional C-corp is that profits and losses can pass through to your personal tax return. Consequently the business is not taxed itself. Only the shareholders are taxed. This is an important factor, however any shareholder who works for the company must pay himself or herself reasonable compensation. Basically shareholder must be paid fair market value or theIR IRS may reclassify any additional corporate earnings as wages.

1. Articles of Incorporation (to first form C-Corporation)

2. Form 2553 Election by a small Business Corporation.

3. Must meet all criteria of an S-Corporation

Points

The IRS imposes restrictions on S-corporation shareholders.

More expensive to form than sole proprietorships and general partnerships, and face ongoing, state-imposed filing requirements and fees.

S-corporations face ongoing corporate formalities, such as holding and properly documenting annual director and shareholder meetings.

Points

Tax Savings - Only the wages of the shareholder who is an employee is subject to employment tax

Businsess Expense Tax Credits

Independent Life

Shareholders are typically not personally responsible for business debts and liabilities.

Unlimited life extending beyond owner illness or death.

Additional capital can be raised by selling shares of the corporation's stock.

Pass-through taxation.

1. Do you have more than 100 shareholders? If so, you can only have a C-corporaiton.

2. Do you want your profits and losses to be reported on you individual tax returns? If so, form an S-corporation.

The standard is usually to file a C-corporation if you have a sizable operation and S-corp is more appropriate if you tend having fewer or hundred share holders.

C-corporations are individually taxable file a corporate tax return and pay taxes at the corporate level.

Double taxation is a possibility for C-corporations, if the company's income is distributed as income resulting in taxation at different levels based on the number of shareholders.

C-corporations can also have multiple causes of stock such as preferred and common stocks.

S-corporations are available to companies they intend on having fewer than 100 shareholders.

S-corporations file an informational federal return but do not pay tax at the corporate level. Profits and losses are reported on the business owners individual tax returns.

S-corporation has pass through taxation, which means you can pass business losses to your personal taxes and is only eligible for once class of stock.

If you have a tech-startup you need to file a C-corporation not an S-corporation.

Check documentation.