For tax purposes organizations are categorized by individuals, businesses, trust,estates, fiduciary, and gift taxes. Individuals differently taxed as resident andnonresident aliens. Federal tax entities predominant forms of businessenterprises are C corporation, S corporation, partnership, limited liabilitycompany (LLC), limited liability partnership (LLP) and sole proprietorship. Thereare significant differences among these entities in federal income tax treatments.Each business organization varies in its formation and liability limitations. A soleproprietorship business is formed by an individual and a general partnership isformed between two or more individuals. These types of organizations haveunlimited liabilities to the individual and general partners, they are fairly easy toform and to dissolve and they have limited life. To form a corporation a charteror articles of incorporation has to be filed in a state doing business and in a USpossession or with the US government and prepare by-laws and issue stocks.There are two types of corporations C and S. C corporations in federal levels aretaxed twice. Once on the net earnings of the corporation and then after the netearnings are distributed to the shareholders as dividends. After receiving theshare of dividends then each shareholder pays taxes on their share of dividends.C Corporation also has a higher rate of state taxes on the net earnings than Scorporation (in those states that have state income taxes). S corporation haslimitation in eligibility to elect S corporation status. To elect as a S corporationafter forming a corporation the shareholder(s) cannot be more the 100 and theycannot be nonresident or temporary resident. The shareholders have to be UScitizens or permanent resident (green card holder). S corporation may have asshareholders only individuals and estates or certain trust. Partnerships andcorporations cannot be shareholders. The S corporation can issue only oneclass of stock (common). S corporation do not pay an entity-level tax on theirfederal earnings and the net earnings and losses passes through K-1 to theshareholders. Both C and S corporation have limited liabilities. A LimitedLiability Partnership (LLP) is formed under a state law. Generally, a partner in aLLP is not personally liable for the debts of the LLP or any other partner, nor is apartner liable for the acts or omissions of any partner, solely by reason of being apartner. This form of organization forms among professionals such as lawyers,doctors, or accountants. A Limited Liability Company (LLC) is an entity formedunder state law by filing articles of organization as an LLC. Unlike a generalpartnership, none of the members of an LLC may be personally liable for itsdebts. An LLC may be classified for federal income tax purposes as apartnership or corporation. A domestic LLC with at leas two members isclassified as a partnership. A trust is a separate taxable entity for federal incometax and usually involves an arrangement created either by a will upon thecreator’s death or by a trust instrument that could take effect during the creator’slife. Decedents’ estates are separate taxable entities during the period ofadministration. Fiduciary is one who receives and controls another person’sbeneficial title or interest. The gift tax is imposed on the transfer of propertyduring the life of a taxpayer. The estate tax is imposed on the transfer ofproperty at the death of the taxpayer.The information provided through this Site is for general educational purposesonly and is provided "as is". The information is not intended to address thecircumstances of any particular individual or group of individuals. This articledoes not offer tax, accounting, legal, investment, or other financial decisions andnothing contained in the article is intended to constitute professional advice forsuch decisions. Information received via this article should not be relied upon forlegal, tax, accounting, investment or other financial decisions and you shouldconsult with an appropriate professional for specific advice tailored to yoursituation. You should always seek the advice of your lawyer, enrolled agent,accountant, financial planner or other qualified financial provider prior to makingany decisions.The information provided through this Site is for general educational purposes only.