A business is defined in the Merriam Webster’s Collegiate Dictionary Tenth Edition as: “A commercial body made up of a number of persons or representatives or organized for the performance of commercial enterprises”. A business is often defined as a separate entity conducted for profit. Businesses may be privately owned, for-profit corporations or government institutions that conduct to meet a social purpose or further a humanitarian cause.
A corporation is usually established by an act of the state legislature. However, there are some corporations that are formed by a board of directors or other specified individuals. Many businesses are actually sole proprietors or owners operated for the benefit of all stakeholders and shareholders.
Private corporations and partnerships are different from corporations when it comes to taxation. Profits made by a partnership are taxed only once, unlike the case of a corporation, where corporations are taxable throughout the year. Corporations, unlike partnerships, are taxed at the end of every reporting period (quarterly for small businesses, semi-annually for large businesses). In addition to corporate taxes, corporations are also often required to pay income tax on dividends and capital gains.
For most domestic corporations, the majority of profits are normally distributed between the partner owners. There are some exceptions to this general rule, such as for publicly traded partnerships which distribute their profits between partners. When this occurs, the distribution is usually based upon each partner’s personal profit. In addition to personal profits, a partnership may also be required to distribute its profits to its share of equity holders or to the owners of other corporations or partnerships. Sometimes, the distribution is set forth in a written agreement between the partners.
A corporation or partnership must have a registered agent. Registered agents are usually limited to managing the business and the filing of any documents with the state. An LLC is not required to have a registered agent, but most often do, because an LLC is not considered a company and therefore is not subject to certain regulations. An LLC can also benefit from having a tax identification number, or TA, which allows it to be taxed like a sole proprietorship or a corporation. However, an LLC cannot utilize corporations filing status, like an S-corp, and therefore is not subject to the filing tax laws that apply to corporations. Also, an LLC cannot use the name of a company in its name, unless it has filed an application and become a qualified organization under the IRS code.
Although there are similarities between sole proprietorships and llCs, there are significant differences as well. One key difference is that sole proprietors and corporations are subject to the law regarding personal liability. LLCs, while not personally liable for the actions of their partners, are not protected by law against personal liability for the actions of the corporation.