As the name suggests, an individual establishment is a business owned by a single person. This single individual is responsible for the entire business operations and is the sole recipient of the organization’s profits. When compared to other legal structures, the individual establishment organizations require less paperwork. Moreover, they are exposed to a fewer business restrictions when compared to others. It is also a popular business model because of its simplicity and easy nature. As an individual establishment, you have to secure local licenses to conduct business operations.
A partnership refers to the bond between two or more individuals who wish to continue a trade or a business. It is important to note that a partnership doesn’t have to pay taxes on its profits. However, it has to publicize its operating profits and losses via the Form-1065. Also, the partnership business has to send the K-1 form to the owners or the partners through whom they can state their financial losses and gains. With the help of these forms, the IRS is aware about the profit and loss allocated to each partner.
To be frank, a corporation is a separate entity from the shareholders. Moreover, the corporations offer limited liability protection to the directors and shareholders. Note that the corporations are separate taxpayers for the purposes of federal taxes. Moreover, a corporation files its own federal income tax return and that’s why it pays its own income taxes.
