| There are different business structures used to | | | | An S Corporation is a tax designation whereby when |
| accommodate different business needs. A sole | | | | you register with the IRS you indicate it will be an S |
| proprietor is a one person operation. When the taxes | | | | Corporation. The term S Corporation comes from an |
| are done everything related to the business profit and | | | | IRS designation where the profit and loss of the |
| loss will be filed under the sole proprietor's personal | | | | company is filed under your personal taxes. As an S |
| taxes. If there are significant losses it could affect | | | | Corporation, you are still responsible for keeping a |
| shareholders personally as they would be personally | | | | Corporate Book and all other duties of a corporation. |
| liable for the business profit or loss. | | | | Going into business as a Limited Liability Company |
| Going into business as a Corporation or S Corporation | | | | (LLC) has its own set of responsibilities. If there is only |
| affords some protection from liability, but there are | | | | one person in the LLC then the business functions a lot |
| rules and regulations that must be followed to be | | | | like a sole proprietor, with some liability protection. If |
| covered. One of the most important things to consider | | | | two or more people are "members" of the LLC, then it |
| is the Corporate Book. This is a book filled with | | | | operates like a partnership for tax purposes. A Form |
| documents outlining steps the board or anyone else | | | | 1065 Partnership return would be filed. Each member |
| has taken including opening a bank account for the | | | | receives a Form K-1 outlining his share of the profit or |
| corporation or buying another business. This book | | | | loss in the business and then files that amount on his |
| should reflect what the business has done over a | | | | personal tax return. |
| specific period of time. | | | | You will need to apply for a Federal ID number which |
| That means the only way you will be able to get the | | | | is like the social security number of the business. A |
| protection is by conducting your business as such. This | | | | sole proprietor doesn't need a federal ID number and |
| includes meetings and minutes of those meetings filed | | | | can use his own social security number instead. To |
| in the Corporate Book. In order to be protected by the | | | | apply for a federal ID number go to the IRS website |
| positive attributes of a corp you must adhere to the | | | | and in the search box type in online federal ID number. |
| rules and regulations. While it offers protection from | | | | Fill out the online application and the number will be |
| liability, it's only good if you actually carry out the | | | | issued immediately. Print a copy of the document that |
| functions, otherwise there is no protection. | | | | lists your federal ID number for future reference. |