A CORPORATION

A corporation Is a legal entity, created by statute (i.e., the state) with all the rights, privileges and responsibilities of a natural person; This business entity is recognized as a separate entity from

its owners under state law, with centralized management, continuity of life and free transferability of interest.
For tax purposes, a corporation may be classified as Regular Corp (C-Corp) or Small Corporation.

Owners who work for the entity are compensated as employees of the company.

REGULAR CORPORATION (C-CORP)

For tax purposes, a regular corporation is a separate entity form its owners. It pays tax on its own income. Currently, under the Tax Cuts and Jobs Act, the law created a single flat rate for corporate tax,

currently at 21% on net income. If the owners decide to receive dividends, a second level of tax is created, since this dividend income will be taxable income on their own tax returns.

Therefore, a C Corporation is subject to double taxation.

 SMALL CORPORATION (S-CORP)

If elected to file its tax as a small corporation, this business will be considered a flow-through entity. A small corporation will not pay taxes, all profits or losses will flow through their business owners,

and each owner will be responsible for paying tax on the income. Business income allocated to S corporation shareholders is not subject to self-employment tax.

There are some restrictions to be accepted as a small corporation. For instance, this company may not have more than 100 shareholders, and these shareholders

 A LIMITED LIABILITY COMPANY

A Limited Liability Company is a hybrid form of business entity combining some of the attributes of a corporation with the status of a partnership. For tax purposes, by default an LLC with only one member

(single member LLC) is classified as a disregarded entity, considered to be the same entity as the owner, and if there is more than one member it is by default classified as a partnership.

Members of an LLC will receive compensation for work in the form of guaranteed payments, subject to self-employment tax.

Members of an LLC can also elect to be taxed as a regular corporation or small corporation with the Internal Revenue Service.

 PARTNERSHIP

A partnership is an association of two or more persons to carry on a business for profit as co-owners. It is formed under State Partnership Statutes. A Partnership Agreement among the partners are required,

to stipulate each partner’s rights and responsibilities in this partnership.

For tax purposes, this company is considered a flow through entity, which will not pay taxes and all profits or losses will flow through their partners (or members if an LLC),

 SOLE PROPRIETORSHIP

Sole Proprietorship is the most common form of business in the United States. It is a business entity that is not legally separate from the individual owner. All income is taxed and paid directly by the owner,

on individual tax form 1040, schedule C.

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