How Does Business Structure Affect Tax Obligations?
The structure of a business significantly impacts its tax obligations. For instance:
Sole Proprietorship: The simplest structure, where the business income is reported on the owner's personal tax return. Partnership: Income is passed through to the partners, who report it on their personal tax returns. Corporation: A separate legal entity that pays corporate taxes on its profits. Limited Liability Company (LLC): Can be taxed as a sole proprietorship, partnership, or corporation, depending on its election.