What Are Legal Entities?
There are five primary legal entity structures: sole proprietorship, limited partnership, limited liability company (LLC), S corporation and C corporation. Entities must be registered within the state where business is conducted. If you pay payroll to fund retirement accounts or medical insurance, your entity must be registered in your home state; in rare cases, however, some traders may wish to register their entity in a state that does not tax entity income. States and municipalities typically require legal entities to file documents, place advertisements and pay a fee to establish their legal formation. For tax purposes, a legal entity is an organization recognized by the IRS by its corresponding Employer Identification Number, whether it has employees or not. Sole proprietors often use their Social Security number as their Employer Identification Number. Sole Proprietorships: Risky Business Trading as a sole proprietor is a little like walking a tightrope without a net: one misstep
