Payroll 101

Separate business entity. Shareholders can be considered employees of this separate entity. The shareholders invest in the company and transfer many of the liabilities to the separate entity. File tax returns, Form 1120, each tax year

The business and the owner are one and the same. The business does not exist without the owner and the business is not a separate entity. All business liabilities belong to the owner and the owner undertakes all risks.

employees of the corporation or they can elect to take their earnings as dividends. However, 2%+ shareholders and their direct descendants cannot take advantage of many of the fringe benefits offered to other employees of a corporation.

whose members” or owners are generally treated as self-employed for tax purposes

independent contractor, a member of a partnership, or is otherwise in business for him/herself.

Income minus cost of goods sold, expenses and taxes for an accounting period.

Payments for the services of a child under the age of 18 who works for his/her parent in a sole proprietorship are not subject to Social Security or Medicare (FICA). These payments are not subject to Federal Unemployment Taxes (FUTA) until the child

Relationship between 2 or more who join together to carry on business. They share, based on their investment in the business, percentages of the profits and losses that result from their business activities. A partnership is not a taxable entity, e

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