The Payroll Book

CHAPTER 1Business Entity

The entity you choose for your business determines several things about the way you process payroll. There are four standard entities for businesses, and we will examine each one of them and their unique attributes in relation to payroll. If you have already chosen your entity type, then you can read only that section. The remaining sections may become useful if you change your entity type.

This is by no means a complete analysis of each type of entity. If you have not chosen the entity type for your business I suggest that you consult with a certified public accountant (CPA) who specializes in small business as well as an attorney who also specializes in small business to discuss not only the cost but also the legal, tax, accounting, and liability aspects of all types of entities in relationship to your particular needs and circumstances.

CORPORATION

Corporations are creatures of the state; that is, you must set up a corporation through a state government. A corporation is a business entity that is owned by a shareholder(s), people who own shares of stock. The shareholder(s) elect a board of directors to oversee the corporation's actions and hire executives to run the day-to-day operation. In many cases in small business corporations the shareholders, the board of directors, and the officers are the same people. The corporation is liable for the actions and finances of the business, but the shareholders are not.

There are two standard classifications ...