Reason to incorporate your business –protect your personal assets from corporate debts and liabilities, get tax benefits and raise capital.
SOLE PROPRIETORSHIP
Business do not separate from the owner; individual has to include business profits on his/her personal tax return; and individual is liable for businesses’ debts and liabilities.
PARTNERSHIP
Must have two or more individuals, parties, groups. They can contribute money, property even their labor, and expect to share profit, loss, and management right of the business. Partnership does not need to pay income tax itself, but each partner has to include their profit or loss on their tax return.
C-CORPORATION
A legal entity that usually files with the state. It protects personal assets from business’ debt and liabilities. indefinite lifespan until dissolved, can have unlimited shareholders, dividend tax on shareholder level, and tax at corporate level.
S- CORPORATION
In order to form a s-corporation in the United States, you must be either resident or citizen of the United States. Usually it’s taxed under each shareholder’s tax return, which avoids double tax. However, taxes like payroll tax, sales tax is still required to file and pay on the corporation itself.
LIMITED LIABILITY COMPANY
Must be approved by state. Owners of an LLC are called members; there is no limitation on the number of members. Tax of an LLC is similar to sole proprietor or a partnership depends on number of members.
PROFESSIONAL LIMITED LIABILITY COMPANY
The purpose of an PLLC is providing professional services. The former must be licensed, because PLLC has to be approved by department of education before it submitted to secretary of state. PLLC is taxed as partnership if multiple members or sole proprietor if one single member.
NOT-FOR-PROFIT ORGANIZATION
Usually is exempt from income and property tax, but still need to file income tax return and payroll tax return. Any surplus of a not-for-profit cannot be returned to its owner or distribute to its shareholders.