The definition of a business can seem simple and straight forward. However, the complexities of the field of business can make it difficult to determine if your business is legitimate. A business is usually defined as an entity organized for the conduct of commercial, industrial, or commercial activities. Many businesses are either nonprofit organizations or for-profit entities that perform a particular activity to meet a specific social cause or further a socially responsible goal. In addition, some businesses are government agencies, such as the Small Business Administration, or corporations, such as Google, Microsoft, Apple and Chase.
Non-Profit Corporations are not charities but are considered to be separate entities from the owners. Profit and loss can be determined by conducting an audit, looking at statistics, or looking at the overall profit. Business can also be incorporated or limited liability. Limited liability companies are run through an attorney and are considered a pass-through entity, meaning they receive tax benefits and have no liability if they breach the agreement. Non-Profit Corporations are run differently, with no formal corporate structure; however, they still need to follow certain regulations Here .
A C Corporation is a type of corporation that has limited liability. A limited liability company is formed by one or more people, generally a corporation or a partnership, who own shares in the business. The business receives all of the profits from the sales of products or services produced or purchased by its employees, but only receives payment if there is a breach by a third party. To qualify as a C corporation, the company must operate exclusively for profit.
Corporations and LLCs both pass through taxation; however, a corporation is not taxed until the owner makes his or her personal income tax return. LLCs are not taxable until their certificate of incorporation is filed with the IRS. Therefore, most small businesses are not subject to any corporate or personal income tax unless the business earns a profit.
Many partnerships fall into the classification of a C corporation or LLC. The partnership is established to conduct business but all of the partnership’s members are treated as owners in the eyes of the law. If one member is injured in an accident, the injured partner can recover any losses from the partnership’s negligence. In this way, a partnership protects its partners from personal losses, such as those that result from lawsuits, while also protecting the partners’ assets from taxes.
Taxation of a Limited Liability Company is different than taxation of a corporation. A limited liability corporation is only taxed if it becomes publicly listed. The profit or loss of the corporation will be taxed like a sole proprietorship or a partnership. There is no tax on the membership; therefore, the LLCs are not taxable. However, if a partnership chooses to be treated as a corporation instead of an LLC, then all of the partners will be taxed individually for their portion of the partnership’s profits.
A sole proprietorship is a separate legal entity. It can establish itself as a corporation or as a sole liability. Unlike a corporation, there is no minimum capital required to start a sole proprietorship. A sole proprietor does not have to pay corporate taxes, although in many cases they may be liable for some or all of the corporation’s liabilities and taxes. Because they are not considered corporations, sole proprietors cannot run for political office.
There are four types of business entity: sole proprietorships, partnerships, corporations, and LLCs. S corporations are the most common form of business entity. An LLC is a form of corporation that can have one or more owners. An S corporation is always separately filed by the owners. An LLC is filed by the company and only the company is taxed.