Organize

	CHOOSING A BUSINESS STRUCTURE an important step in starting a new business is to select the type of business structure or organization you will use. The organization of a business defines the ownership and responsibilities of the owner(s), and each type has advantages, disadvantages and tax consequences you should be aware of before you make a final decision. You may wish to consult a tax practitioner (accountant, enrolled agent, attorney, etc.).
	The six most common types of business organization.
	Which structure is right for you? Sole Proprietor Easy to set up and maintain. Owner is personally responsible for all business debts. Partnership Easier to establish and register than a corporation; filing tax returns is easier. Partners can be personally liable for business debts and liabilities, such as a legal judgment. Corporation - C Corp. Shields personal assets from business debts and liabilities. Can be complicated and expensive to establish and maintain. Corporation - S Corp. Benefits corporations that want a simpler tax structure that passes through income to owner. Many of the liability tax benefits now are available through Limited Liability Company with fewer restrictions. Limited Liability Company - LLC Provides benefits of corporations, but less complicated to set up and maintain. Other Options available in addition to the above.	top
	Sole Proprietor A sole proprietorship is a business owned and operated directly by one person. This is the simplest and most common form of small business organization. Income earned by the business is reported as part of the owner's individual income tax return. Sole proprietors may need to make estimated tax payments because taxes are not withheld from their business income. A sole proprietor is not an employee of the business.
	Partnership A partnership is a business owned by two or more persons. Each partner contributes money, property, labor or skills, and each shares in the profits, losses, and debts. A partnership is not a taxable entity. Each partner must include his or her share of income (or loss) from the partnership on his or her personal income tax return. Like sole proprietors, personal income taxes are usually not withheld for the partners and estimated tax payments may be required.	top
	C Corporation A corporation is a legal entity created under state or federal law with an existence separate and apart from its members or stakeholders. Corporations report business income on a corporate income tax return. Corporations also have additional reporting and registration obligations to the Secretary of State.
	S Corporation A S corporation is generally exempt from tax. Each shareholder includes his or her income (or loss) from the S corporation on his or her personal income tax return.
	Limited Liability Company The Limited Liability Company is a business owned by one or more members. It is a relatively new form of business organization, having some aspects of a partnership and some of a corporation. Business income from a limited liability company may be taxed as a corporation or as a partnership. Limited liability companies must register with the Secretary of State.
	Other Includes estates, business trusts, personal trusts, unincorporated organizations or associations.
	A business may be conducted through a variety of organizational structures. A specific business structure is generally chosen for liability and/or tax reasons.	top

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