Business Formation - F.A.Q's
1 - What are some of the common types of business organizations?
The most common forms of business organizations include:
Sole proprietorship
Partnership
General partnership
Limited partnership
Limited liability partnership
Corporation
Subchapter S corporation
Subchapter C corporation
Limited liability company
The form in which you conduct your business determines issues such as the extent of personal liability that you have from the business and how the business will be taxed.
2 - Do I need a taxpayer identification number?
Any business that has employees must have a taxpayer identification number, which is often referred to as an "EIN" (employer identification number). An EIN is a number assigned to a business for tax reporting and withholding deposit purposes - it is different from your individual social security number. Both a federal and a state EIN are required.
An EIN is required so that withholdings (federal and state income tax, social security and Medicare taxes, unemployment insurance, and other taxes) can be remitted to the Internal Revenue Service and state tax authorities. The Internal Revenue Service and many state tax authorities publish pamphlets and booklets which can help you determine whether you need a separate EIN for your business.
3 - Do I need insurance?
Whether you need insurance depends on your business activities and the amount of liability exposure that you have from the activity. In addition, insurance may be required for employees (such as worker's compensation insurance, state disability insurance, or unemployment insurance).
(i.) commercial multi-peril policies (covering a variety of exposures)
(ii.) liability insurance covering premises, activities, and products
(iii.) business interruption insurance
(iv.) surety and performance bonds
(v.) employee fidelity bonds
(vi.) malpractice and errors and omissions coverage
In deciding whether to purchase insurance, an analysis of your risk exposure should be performed. If you are unable to determine your risk of loss from engaging in business, contact a commercial lines insurance broker.