TaxEsqBlog -by Ronald J. Cappuccio, J.D., LL.M.(Tax)

Corporations - the traditional business Corporations are the prime type of entity used in publicly traded companies, larger entities, and when the owners want a separate taxable entity from the individuals. A corporation is set up by filing a certificate of incorporation or articles of incorporation in the state of choice. In addition to getting a separate tax identification number, the corporation should have bylaws detailing the officers, the operation of the business and the amount of shares and any particular rights in different classes of shares. Liberation files a separate tax return and pays income tax on the income earned to both the state and federal governments. After pays taxes if it wants to distribute some of the profit to the owners, these distributions are called dividends and are taxed in the income of the shareholders. This can lead to the famous "double taxation" where the corporation is taxed and then the same income is taxed again at the shareholder leve...

The LLC is the most popular form of business in the US The limited liability company is taxed like a partnership in the US as the default rule. There can be other types of taxation elected, but that is generally not advisable. The limited liability company is established by filing a certificate of formation or articles of formation with the state. This is like the cover page of a book. It s just a bare outline of the business. It lets the public know that the entity is formed. The legal documents which control the limited liability company is the operating agreement and a buy and sell agreement. The operating agreement establishes all the terms of the LLC, the rights of the membership, the control of the LLC, and its tax attributes. The LLC is an extremely flexible type of entity. Similar to a partnership, it is as flexible as the attorney and the owners can be in drafting the documents. If the owners of an LLC simply adopt a form that they grab off the Internet or some service, th...

Basic Entities in the United States - Partnerships Partnerships are similar to a sole proprietorship in that the individuals have personal liability. This means that each partner is liable for their own actions and the actions of the other partners. That is a big negative of the partnership versus a limited liability entity. For tax purposes, partnerships are generally disregarded and the attributes of income and deductions are passed through to the individuals. That is why they are referred to as "pass-through" entities The partnership will file a federal partnership tax return as well state all partnership tax returns, but it usually does not have any taxable income at the partnership level. Rather, the taxable income is solely pass-through to the partners. Partnerships can also have some interesting tax issues. For example if people simply contribute cash to the partnership for their interest, it is easy. But if one person contributes cash and another person contribut...

Basic Entities in the United States. Anyone, even a non-US citizen and non-US resident can establish a sole proprietorship. This is simply operating the business under your own name. You have personal liability for the actions of any employees or any actions taken in the name of the business. The business can also have a trade name also known as a " doing business as" name which is typically filed with the state. The advantage of a sole proprietorship is simplicity. There is not much you need to do to set up the business other than obtaining a tax identification number and possibly a trade name certificate from the state. Depending on how the services are rendered are rendered, there may be some licenses that are required but for most online businesses that it is not necessary. Another advantage of the sole proprietorship is that it is taxed on the individual tax return. There is no double taxation. The sole proprietorship is simply taxed at the individual level for both ...

Unlike many countries, you do not have to be a citizen of the United States, or a resident, in order to establish a business in the US. A non-US citizen and resident establish a business without having any kind of immigration visa or any special. That person will be treated the same as a resident and citizen of the US. Also unlike many countries, the United States, is exactly what its name indicates: "states". Each of the 50 states, and the District of Columbia have different laws and requirements for establishing a corporation, limited liability company, limited partnership or any of the various business entities. Also just because a business is established in one state does not mean that it is authorized to set up an office, warehouse or manufacturing plant in another state. For example if an online business were established in Delaware, and decided to have a warehouse employees in New York, you need to have that Delaware corporation or LLC authorized to do business in N...