IRS

(TAX ID # OR EIN)

An Employer Identification Number is a unique number assigned by the Federal IRS (don’t confuse this with the Texas Sales Tax Number) to identify the tax accounts of certain businesses, even if there are no employees. Think of the EIN like a social security number for the business. Most banks will request your IRS EIN when opening a bank account or line of credit.

Partnership

(GENERAL, LIMITED, OR LLP)

A partnership is a business arrangement between 2 or more owners or “partners.” While a general partnership is probably one of the most common types of businesses, there aren’t many liability protections. A limited partnership or limited liability partnership may provide similar protections as an LLC or corporation without some of the administrative headaches and regulations.

Corp

(CORPORATION)

A corporation is a business entity owned by “shareholders” rather than a member or partner. Yes, shares are issued just like for the stock market (though they are not publicly traded). More formal business structure with a President, VP, etc. More administrative requirements like a board of directors. May be taxed twice depending on election.

Why form an entity at all?

Look, you don’t have to form a business entity to run your business. You can continue to operate as a sole proprietorship (the default) most of the time without issue. But do you drive your car without insurance? Do you lay out in the sun all day without sunscreen? At some point, you’re going to get burned. Incorporating or forming a Limited Liability Company is basically like buying insurance that will protect an owner in a lot of situations.  There are other benefits like saving on taxes, providing certainty and structure for the operations, and even providing a certain image and credibility to the public.