When starting a business, an owner must decide what type of entity it will be. This type determines which tax forms a business needs to file. The most common forms of businesses are:
● Sole Proprietorship: a single owner of an unincorporated business.
● Partnerships: two or more persons who join to carry on a business.
● Corporations: a legal entity that is separate and distinct from its owners. Corporations are owned by their stockholders (shareholders) who share in profits and losses generated through the firm's operations.
● S Corporations: S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.
● Limited Liability Company: a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.