Overview: If you're signing up for Buddy Punch Payroll services and not quite sure what to choose for your business type, you can use the information below to determine what you should select.
IRS Guide on Business Structures
The IRS provides a comprehensive guide on different business structures, such as sole proprietorships, partnerships, corporations, and S corporations. It also details Limited Liability Companies (LLCs) and explains the tax implications and legal considerations for each type of business structure.
This guide can help you determine your type of business: https://www.irs.gov/businesses/small-businesses-self-employed/business-structures
Another way to verify business type is through various documents, depending on the type of business structure you have chosen. Here are some key documents typically associated with different business types:
1. Articles of Incorporation: For corporations, this document is filed with the state government to legally document the creation of the corporation. It includes details like the corporation’s name, purpose, corporate structure, and other important details.
2. Articles of Organization: For Limited Liability Companies (LLCs), the Articles of Organization are filed with the state. This document establishes the LLC and includes information like the business name, address, and names of the members.
3. Partnership Agreement: In the case of a partnership, this document outlines the details of the partnership arrangement, including the responsibilities of each partner, profit sharing, dispute resolution methods, and other operational details.
4. Sole Proprietorship: Sole proprietorships might not have formal formation documents since they don’t require registration with the state in many cases. However, business licenses, trade name registrations, or permits specific to the business type can serve as verification.
5. Employer Identification Number (EIN): While not a document that classifies a business, the EIN is a federal tax identification number for businesses. The IRS issues EINs to corporations, partnerships, LLCs, and some sole proprietorships, and this number is used for tax filing and reporting.
6. State Registration Certificates: Many businesses must register with their state and may receive a certificate or other document as proof of registration. This can include a sales tax permit, a state business license, or a certificate of authority (for doing business in a state other than where the business was formed).
7. Operating Agreement (for LLCs): Although not required in all states, many LLCs create an operating agreement outlining the management structure, financial arrangements among members, and other operational details.
8. DBA Filing (Doing Business As): If the business operates under a trade name or fictitious name, a DBA filing with the local or state government confirms the name under which the business operates, which can be different from the legal name of the business entity.
9. Tax Returns: Business tax returns can also indicate the business structure, as different forms are used for different types of entities (for example, Form 1120 for corporations, Schedule C for sole proprietorships, etc.).
10. Business Licenses and Permits: Depending on the industry and location, various licenses and permits may be required. These can also help to verify the nature and classification of the business.