Starting a business involves navigating various legal and financial considerations, making it crucial to understand key glossary terms. These include business entities like LLCs and S Corporations, essential tax forms such as 1040 for individual tax returns and 1120 for corporate tax returns, and concepts like pass-through taxation to avoid double taxation. Familiarity with state and local requirements, especially in regions like Nevada and Las Vegas, is also essential, covering forms like the Nevada Business Registration and city-specific permits. Knowing these key terms helps entrepreneurs ensure compliance, manage their business effectively, and optimize their tax strategies.
| Term | Definition |
|---|---|
| 1. LLC (Limited Liability Company) | A business structure that offers personal liability protection and pass-through taxation. |
| 2. S Corporation (S Corp) | A unique identifier is assigned to a business entity by the IRS for tax purposes. |
| 3. C Corporation (C Corp) | A business entity that is taxed separately from its owners and can have an unlimited number of shareholders. |
| 4. Pass-Through Taxation | When a corporation’s profits are taxed at the corporate level and again as shareholder dividends. |
| 5. Double Taxation | Income is taxed only once at the owner’s tax rate rather than at the corporate level. |
| 6. Shareholder | An individual or entity that owns shares in a corporation. |
| 7. Member | An owner of an LLC. |
| 8. Operating Agreement | A document outlining the management structure and operating procedures of an LLC. |
| 9. Articles of Incorporation | Documents filed with the state to legally document the creation of a corporation. |
| 10. Bylaws | Rules governing the internal management of a corporation. |
| 11. EIN (Employer Identification Number) | A salary that S Corp owners must pay themselves is subject to employment taxes. |
| 12. Registered Agent | A person or entity designated to receive legal documents on behalf of a business. |
| 13. Annual Report | A report filed yearly with the state detailing a corporation’s or LLC’s activities and finances. |
| 14. Dissolution | The process of formally closing a business entity. |
| 15. Liability Protection | Legal protection that separates personal assets from business debts and obligations. |
| 16. Self-Employment Tax | Taxes that self-employed individuals must pay, covering Social Security and Medicare. |
| 17. Reasonable Salary | The legal distinction between the corporation and its shareholders protects personal assets. |
| 18. Distributions | Payments made to owners/shareholders from business profits. |
| 19. Franchise Tax | A state tax levied on businesses for the privilege of operating as a legal entity in that state. |
| 20. Capital Contribution | Money or property that members invest in an LLC. |
| 21. Corporate Veil | The legal distinction between the corporation and its shareholders that protects personal assets. |
| 22. Fiduciary Duty | The legal obligation to act in the best interest of another party, such as a corporation’s shareholders. |
| 23. Gross Income | The total revenue received before any expenses are deducted. |
| 24. Net Income | The total revenue received minus expenses, also known as profit. |
| 25. Depreciation | The allocation of the cost of a tangible asset over its useful life. |
| 26. Amortization | The spreading out of capital expenses for intangible assets over a specific period. |
| 27. Deduction | Expenses that can be subtracted from gross income to reduce taxable income. |
| 28. Tax Credit | A dollar-for-dollar reduction in the amount of tax owed. |
| 29. Estimated Taxes | Quarterly tax payments that self-employed individuals and businesses must make on their expected income. |
| 30. Withholding | The portion of an employee’s wages that is not included in their paycheck but is instead sent to the government as partial payment of income tax. |
| 31. Payroll Taxes | Taxes imposed on employers and employees, usually calculated as a percentage of the salaries that employers pay their staff. |
| 32. FICA (Federal Insurance Contributions Act) | A U.S. law that creates a payroll tax requiring a deduction from the paychecks of employees as well as a contribution from employers. |
| 33. Capital Gains | The profit from the sale of an asset. |
| 34. Fiscal Year | An accounting method where revenues and expenses are recorded when they are received or paid. |
| 35. GAAP (Generally Accepted Accounting Principles) | A standard framework of guidelines for financial accounting. |
| 36. Accrual Accounting | An accounting method where revenue and expenses are recorded when they are earned or incurred, not when cash is exchanged. |
| 37. Cash Accounting | An accounting method where revenues and expenses are recorded when they are actually received or paid. |
| 38. Balance Sheet | A financial statement that summarizes a company’s assets, liabilities, and shareholders’ equity at a specific point in time. |
| 39. Income Statement | A financial statement that shows a company’s revenues and expenses over a period, resulting in net profit or loss. |
| 40. Cash Flow Statement | A financial statement that shows the inflows and outflows of cash within a business over a period. |
| 41. Retained Earnings | The accumulated net income that is retained by a company rather than distributed to its shareholders as dividends. |
| 42. Audit | An official inspection of an organization’s accounts, typically by an independent body. |
| 43. Tax Bracket | The IRS forms that corporations use to report their income, gains, losses, deductions, and credits and to figure out their income tax liability. |
| 44. Marginal Tax Rate | The tax rate applied to the last dollar of income earned. |
| 45. Effective Tax Rate | The average rate at which an individual or corporation is taxed. |
| 46. Form 1040 | The standard IRS form that individuals use to file their annual income tax returns. |
| 47. Form 1120 | A range of incomes is taxed at a specific rate. |
| 48. Form 1065 | The IRS form that corporations use to report their income, gains, losses, deductions, and credits and to figure their income tax liability. |
| 49. K-1 (Form 1065) | A tax document issued for an investment in partnership interests, reporting each partner’s share of the partnership’s earnings, losses, deductions, and credits. |
| 50. Audit Trail | A step-by-step record by which accounting data can be traced to its source. |
Understanding these key glossary terms and the associated forms is essential for anyone starting a business. By familiarizing yourself with the requirements and processes for both federal and state regulations, particularly in specific areas like Nevada and Las Vegas, you can ensure that your business operates smoothly and legally. This knowledge not only helps in managing your business effectively but also optimizes your tax strategies, providing a solid foundation for success and growth.