If you’re applying for your Employer Identification Number (EIN) so that you may become a part of the system, then you need to learn which business structure suits you best. We’ve described the major characteristics of some common business structures so you may choose accordingly to your interests and needs. If you need further assistance with filing your EIN number then be sure to contact Gov Doc Filing for friendly assistance.
Sole Proprietorship:
- A sole proprietorship is one individual who owns a company.
- It is the most simple and common business structure.
- A sole proprietor may be a married couple in business.
- A sole proprietor can be a self-employed individual or an independent contractor.
- Sole proprietors may or may not have employees.
- Sole proprietors may enjoy some pros like fewer taxes, fewer legal controls and greater flexibility of management.
- The owner of the business is personally liable for all debts incurred by the business.
Personal Service Corporation:
- It is a corporation whose purpose is to provide personal services to individuals or groups.
- A personal service corporation is an entity set under the regulations by the Internal Revenue Service (IRS).
- It is a type of C Corporation with at least 10% of its stock (by value) is owned by professionals who provide personal services for the corporation.
- In Personal Service Corporation the employees/owners must perform 20% of the services themselves.
Decedent Estate:
- A decedent estate is a rightful succession to a legal entity after a person’s death.
- The estate consists of the real and or personal property of the deceased person.
- The estate pays any debts owed by the decedent and distributes the balance of the estate’s assets to the beneficiaries of the estate.
General Corporation:
- A general corporation is a legal entity established with certain legal powers, rights, privileges, and liabilities.
- It may be composed of two or more than two partners.
- The partners share the profits, losses, and the management of the business.
- A General Corporation is also known as C Corporation.
- It is typical for medium and large companies due to unlimited stock and easy transfer of shares.
- The profits of this organization are taxed twice; first at the corporate level and then as dividends to shareholders.
S Corporation:
- An S corporation is a type of corporation that meets required specification of the subchapter S of chapter 1 of the Internal Revenue Code.
- The income of an S corporation generally is taxed to the shareholders of the corporation rather than to the corporation itself.
- A “C Corporation” must apply to obtain this special tax status from IRS.
Limited Partnership:
- A Partnership is an arrangement between two parties who carry on a trade, business, financial operation, or venture and divide its profits.
- The partners may be individuals, businesses or organizations.
- Partners of the company manage the business and share the losses and profits of the company wholly.
- Each partner is jointly liable for the all the partnership’s debts.
Limited Liability Company (LLC):
- In the limited liability company (LLC) structure the members of the company are not liable for the company’s debts.
- Members/owners may include individuals, corporations, other LLCs, and foreign entities.
- Limited Liability Companies have the characteristics of both a corporation and sole proprietorship.
- There can be no more than one active LLC with the same name in the same state.
- The details of the organization of the LLC are drawn out in a contract that includes management, assignability of interests, and distribution of profits and losses.
