When starting a business, you must determine the form of business structure you’re going to establish. The business structure determines the amount of regulatory paperwork you will have to file, your personal liability regarding investments into your business, and the taxes you will have to pay. The most common business structures include:
Sole Proprietorship
A business owned and managed by one individual who is personally liable
for all business debts and obligations. Easiest form of business to establish
and does not require registration.
Partnership
Two or more people share ownership of a single business and who join together to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.
A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it "passes through" any profits or losses to its partners. Each partner includes his or her share of the partnership's income or loss on his or her tax return.
C-Corporation
A legal entity owned by shareholders. The IRS taxes C-Corporation's profits
as well as dividends paid to shareholders. The taxable income will be the
money the corporation retains at the end of the year for its future needs and
operating expenses, and the amount it distributes to its shareholders as
dividends.
S-Corporation
A special type of corporation created through a tax election. An eligible
domestic corporation can avoid double taxation (once to the shareholders
and again to the corporation) by electing to be treated as an S corporation.
Limited Liability Company (LLC)
A relatively new, hybrid-type of legal structure that provides the limited
liability features of a corporation and the tax efficiencies and operational
flexibility of a partnership
Non-Profit Coporation
An organization engaged in activities of public or private interest that are
motivated by making a profit. Some non-profits are exempt from paying
federal taxes.
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Financial Records
Why should I keep financial records?
Good records will help you monitor the progress of your business, prepare your financial statements, identify source of receipts, keep track of deductible expenses, prepare your tax returns, and support items reported on tax returns.
QuickBooks Pro Edition 2008 makes accounting easy with tools to organize your finances all in one place. Complete tasks like payroll, invoicing, bill tracking and check writing. Track sales and expenses, and easily share this data with MS Word and Excel. With QuickBooks Pro, you’ll spend less time on routine tasks and more time on business. We have arranged for BizNiz 101's members to receive a 20% discount and free shipping on QuickBooks Premier. QuickBooks is the leading accounting program for Entrepreneurs. Click on the link below to receive additional information.
What kinds of financial records should I keep?
You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.
Visit these resources to learn more about which business structure is right for you:
Guide to Choosing a Business Structure The U.S. Small Business Administration provides this clear and concise guide covering the most popular business structures. Outlines the advantages and disadvantages of each type of business structure as well as tax requirements.
Tax Information - Business Structures
The Internal Revenue Services provides information on the tax implications of the most common business structures.
Business Forms
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