Now that you’ve made the decision to start your own business, you need to determine what type of corporation it will be before registering it with the state. There are different types of business structures: S corps, C corps, non-profit corporations, and LLC (limited liability corporation).
You will need to determine which type your business is. A quick overview of each is as follows:*
Sole Proprietorship: Has only one owner and does not require you to set up a business with the state, however, you will be reporting taxes on your personal tax form 1040 and add Schedule C (“Profit or Loss from Business”) to your filing.
Limited Liability Company (LLC): This business form falls somewhere between a corporation and a partnership or sole proprietorship in terms of protection by the law. In most states, LLC owners get legal protection from lawsuits like a corporation. Reporting requirements for LLCs aren’t as strict as they are for a corporation. LLCs don’t have to pay corporate taxes or file all the forms required of a corporation. The IRS treats LLCs as partnerships or sole proprietorships unless they specifically ask to be taxed as corporations.
Partnership: The IRS automatically considers any business started by more than one person to be a partnership. Each person in the partnership is equally liable for the activities of the business. Partnerships aren’t taxable entities, but partners do have to file an informational IRS Form 1065 with their personal tax returns.
S or C Corporation: Corporations are separate legal entities, and their owners are protected from claims filed against the corporation’s activities. However, the obligations that come with incorporating are tremendous, and a corporation needs significant resources to pay for the required legal and accounting services. There are two types of corporate structures:
- S corporation: This corporation has fewer than 100 shareholders and functions like a partnership but gives owners additional legal protection.
- C corporation: This corporation is a separate legal entity that files its own tax returns. It is treated in the courts more or less like a person. Owners must split their ownership by using shares of stock.
Now that you’ve determined what type of business structure you are going to use, it’s time to name your business and to see if the name is available. Use Indiana’s business entity search tool and see if the name you want is free to use.
If the name you desire is available, take the next step and register your business with the state. You will need to sign-up for the state’s Access Indiana Dashboard if you do not already have an account with the state created, to register your business. You can also do a business entity search once you are logged into this area as well, so if you’re sure you are ready to start a business and register it, you could save a step from doing a name search and then setting up an account with Access Indiana.
This Access Indiana area will help you to register with the Department of Workforce Development, the Department of Revenue, you will get information about trademarks, wage reporting, you can submit a commercial permit, submit business entity reports, maintain other reporting, update your business’ information, and more – all to help keep your business up-to-date and well-equipped with everything needed to be compliant and successful.
*Information provided by Dummies.com