The way your business is structured affects taxation, legal and financial liability as well as decision-making authority. Before selecting a business structure, consult your attorney and/or accountant as each structure carries with it unique legal and tax consequences.
The US Small Business Administration website may be of assistance as you choose the business structure for your business.
Types of Business Structures
Sole Proprietorship
A sole proprietorship is a business that is owned and operated by an individual. The owner is personally and legally responsible for his or her actions. All profit or loss from a sole proprietorship belongs to the owner.
General Partnership
A general partnership is formed by two or more people who agree to contribute money, labor and/or skill to a business and to share its profits, losses, and management. All partners typically are held legally responsible for their own actions and the actions of the other partners.
To file your sole proprietorship or general partnership business name:
- Download the Certificate of Assumed Name.
- File your Assumed Name form with the County Register of Deeds.
Download Certificate of Assumed Name
Note: There is no statewide name registration for sole proprietorships or general partnerships, so you must file your business name in the county where you conduct business.
Limited Liability Company (LLC)
A limited liability company (LLC) is legally distinct and separate from its owners. An LLC offers its owners both limited personal liability for actions of the business and special tax treatment that may prevent what has been called “double taxation” of the owners’ income.
To register an LLC online, create a Login as a First Time User and follow instructions to Register.
Corporation (C-Corporation)
A corporation is a separate legal entity from the individuals who form it and its owners and shareholders. Corporations require several internal and external corporate formalities to stay in good standing with the state. You will likely need to hold shareholder and director meetings, adopt bylaws, file annual reports, and fulfill other requirements to legally operate your business. There are more complex tax rules and a higher degree of liability protection for a corporation. Corporation income and loss get reported only at the corporate entity level, and business profits get double-taxed; they are taxed at the business tax rate when they’re earned and taxed again when distributed as shareholders’ dividends.
To register a corporation online, create a Login as a First Time User and follow instructions to Register.
Nonprofit Corporation
Nonprofit Corporations do charity, education, religious, literary, or scientific work. If they meet the requirements, nonprofits can receive tax-exempt status. Nonprofits follow organizational rules similar to a C-Corporation, and need to follow special rules about what they do with any profits they earn; they cannot distribute profits to members or political campaigns. Nonprofits can file with the IRS to get tax exemption; this process is separate from the registration with the state where they register.
To register a nonprofit corporation online, create a User Name and Password and follow instructions to Register.
S-Corporation
The S corporation is a corporation of LLC that has elected a special tax status with the IRS. According to the IRS, S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.
A business must first register as a C-Corporation or LLC with the State before applying as an S-Corporation with the IRS. Additional information, requirements, and application process can be found on the IRS website.