There are several types of Business Entities and each has its own legal and tax return requirements. Some tax laws/rules are the same for corporations, partnerships, limited liability company, or sole proprietorships, while others are entity-specific. States and Local jurisdictions, such as counties and cities, may have their own regulations and taxes, as well. A person is a member of an LLC, a partner in a partnership and can be an officer, director, stockholder or employee of a corporation. 

A business entity must be chosen before beginning a business if more than one owner is to be involved.  Invest in consultations with both a lawyer and an accountant before choosing a business entity.  Be sure to ask questions so you fully understand your obligations and potential  liability.  Your choices are important and will make a difference!

If you are chosen for a tax audit, it is important to realize you may need to prove your expenses were necessary and customary for your business.  You may need to provide records that substantiate the business income you reported.  Be sure your records will stand up to scrutiny.

The following links provide a brief summary of the different types of business entities and other issues of interest to business owners.  Also, link to our favorite Business Tax Tips directed to entrepreneurs and business owners.