What are the various types of Business Organizations – Structures
and which is best?

Flow Chart - Requirements to Prove Business Eligibility 
Flow Chart for AB 1672 proof of bonified business and employees

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IRS Small Biz and Self Employed Tax Center

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  1. Business Structure.  An early choice to make is to decide on the type of structure for the business. The most common types are sole proprietor, partnership and corporation. The type of business chosen will determine which tax forms to file.
  2. Business Taxes. There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. In most cases, the types of tax a business pays depends on the type of business structure set up. Taxpayers may need to make estimated tax payments. If so, use IRS Direct Pay to make them. It’s the fast, easy and secure way to pay from a checking or savings account.
  3. Employer Identification Number (EIN).  Generally, businesses may need to get an EIN for federal tax purposes. Search “EIN” on IRS.gov to find out if the number is necessary. If needed, it’s easy to apply for it online.
  4. Accounting Method. An accounting method is a set of rules used to determine when to report income and expenses. Taxpayers must use a consistent method. The two most common are the cash and accrual methods:
  5. Under the cash method, taxpayers normally report income and deduct expenses in the year that they receive or pay them.
  6. Under the accrual method, taxpayers generally report income and deduct expenses in the year that they earn or incur them. This is true even if they get the income or pay the expense in a later year.

Get all the basics of starting a business on IRS.gov at the Small Business and Self-Employed Tax Center.

Resources for Starting

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Resources for Managing

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IRS Definition of if your are really a business or not

tax almanac.org/

wikipedia.org/

Buy & Sell Agreements

SCORE Business Valuation 101

Qualified Joint Venture

CA Franchise Tax Board’s Guide & IRS to:
Common Forms of Ownership

 

Sole Proprietorship
General Partnership
Limited Partnership

Corporation

Personal Service Corporation
Benefit Corporation
Social Purpose Corporation
Nonprofit Corporation

Limited Liability Company

Single Member Limited Liability Company
Limited Liability Company Classified as a Partnership
Limited Liability Company Classified as a Corporation

Appendices

Appendix 1: Doing Business As
Appendix 2: Commonly Used Terms

 

IRS

  • Choose a business structure. The form of business determines which income tax return a business taxpayer needs to file. The most common business structures are:
    • Sole proprietorship: An unincorporated business owned by an individual. There’s no distinction between the taxpayer and their business.
    • Partnership: An unincorporated business with ownership shared between two or more people.
    • Corporation: Also known as a C corporation. It’s a separate entity owned by shareholders.
    • S Corporation: A corporation that elects to pass corporate income, losses, deductions, and credits through to the shareholders.
    • Limited Liability Company: A business structure allowed by state statute.
  • Choose a tax year. A tax year is an annual accounting period for keeping records and reporting income and expenses. A new business owner must choose either:
    • Calendar year: 12 consecutive months beginning January 1 and ending December 31.
    • Fiscal year: 12 consecutive months ending on the last day of any month except December.
  • Apply for an employer identification number. An EIN is also called a federal tax identification number. It’s used to identify a business. Most businesses need an EIN.
  • Have all employees complete these forms:
    • Form I-9, Employment Eligibility Verification
    • Form W-4, Employee’s Withholding Allowance Certificate
  • Pay business taxes. The form of business determines what taxes must be paid and how to pay them.

Taxpayers interested in starting a business can find information for some industries on the Industries/Professions Tax Centers webpage. Each state has additional requirements for starting and operating a business. Prospective business owners should visit their state's website for info about state requirements.

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