Sole Proprietorship: A sole proprietorship is not registered like an LLC or corporation. An individual who decides to do business is, by default, a sole proprietor. There is no legal separation between the business and the owner, which means there is unlimited liability for the owner. A sole proprietorship that does not use at least the owner's last name in the business name must register, what is called, a fictitious name. This is often referred to as a DBA. A sole proprietor files taxes on their personal income tax return at the end of the year.
General Partnership: A general partnership, like a sole proprietorship, is also not registered like an LLC or Corporation. Two or more people who decide to do business together are by default a general partnership. Similarly, there is no legal separation between the business and the owners, which means there is unlimited liability for the partners. A general partnership that does not include the partners' last names in the business name must also register a fictitious name. A general partnership files income taxes on federal form 1065 and state form PA 20S/PA65.
Single-Member Limited Liability Company: A single-member limited liability company has only one owner or member and is legally formed by filing the proper paperwork with the Secretary of State. Forming an LLC creates a separate legal entity from the owner, which creates a degree of legal protection for the owner. A single member LLC can elect to file income taxes on the owner's personal income tax return, referred to as a disregarded entity, or, elect to file as an s-corporation. If s-corporation status is elected, the LLC would file federal form 1120S and state form PA20S/PA65. Electing s-corporation status also requires the owner to pay themselves on a W-2 and withhold the necessary federal, state, and local taxes.
Multi-Member Limited Liability Company: A multi-member limited liability company has 2 or more owners or members and is legally formed by filing the proper paperwork with the Secretary of State. Forming an LLC creates a separate legal entity from the owner, which creates a degree of legal protection for the owner. A multi-member LLC can elect to file income taxes as a partnership, s-corporation, or a c-corporation. An LLC partnership would file the Federal form 1065 and state form PA20S/PA65. An LLC s-corporation would file federal form 1120S and state form PA20S/PA65. Electing s-corporation status also requires the owner to pay themselves on a W-2 and withhold the necessary federal, state, and local taxes. An LLC c-corporation would file the federal and state corporate tax report.
Corporation: A c-corporation is legally formed by filing the proper paperwork with the Secretary of State. Forming a corporation creates a separate legal entity from the owner/s, which creates a degree of legal protection. A c-corporation has the option to issue stock to raise capital. A c-corporation files the federal and state corporate tax report. Owners have the ability to be paid either through a W-2, dividends, or both.