Glossary of Business & Tax Terms
Clear definitions of common business, LLC, and tax terms to help you understand the concepts that matter.
A
Articles of Organization
The document filed with a state to officially form your LLC. It typically includes the LLC name, registered agent, and management structure.
Read more →Adjusted Gross Income (AGI)
Your total income minus specific deductions allowed by the IRS, used to calculate taxable income and eligibility for certain tax credits.
Annual Report
A report filed with the state each year to keep your LLC in good standing. Most states require this along with a filing fee.
C
C-Corp
A corporation taxed separately from its owners. Profits are taxed at the corporate level and again when distributed to shareholders as dividends.
Compliance
The act of meeting all legal and regulatory requirements set by federal, state, and local agencies for your business entity.
Contractor
An individual or company that provides services to a business without being an employee. Generally responsible for their own taxes.
D
Deduction
A business expense that reduces your taxable income, thereby reducing the amount of tax you owe.
Read more →Disregarded Entity
A single-member LLC that is not taxed separately from its owner. The IRS treats the LLC as if it does not exist for tax purposes.
E
EIN (Employer Identification Number)
A unique nine-digit number assigned by the IRS to identify your business for tax purposes. Required for most LLCs to open bank accounts and hire employees.
Read more →Estimated Taxes
Quarterly tax payments made by self-employed individuals and business owners to cover income tax and self-employment tax throughout the year.
F
Franchise Tax
A tax levied by some states on the privilege of doing business in that state. Not all states have franchise taxes; examples include Delaware and California.
Foreign-Owned LLC
A US LLC owned in whole or in part by a non-US citizen or foreign entity. Special tax filing requirements may apply, including Form 5472.
Read more →O
Operating Agreement
A legal document that outlines the ownership, management structure, and operating rules of an LLC. Strongly recommended for all LLCs even if not required by state law.
P
Pass-through Taxation
A tax structure where business profits pass through to the owner's personal tax return rather than being taxed at the entity level, avoiding double taxation.
Payroll Tax
Taxes withheld from employee wages and contributions made by employers, covering Social Security, Medicare, and federal/state unemployment taxes.
R
Registered Agent
A person or company designated to receive official legal and government documents on behalf of an LLC. Must have a physical address in the state of formation.
Reasonable Salary
For S-Corp purposes, compensation paid to an owner-employee that is comparable to what a similar business would pay for the same services.
S
S-Corp
A tax classification (not a separate entity type) that allows an LLC to split income between owner salary and distributions, potentially reducing self-employment tax.
Read more →Self-Employment Tax
A 15.3% tax covering Social Security and Medicare that self-employed individuals and LLC owners pay on net business income.
Read more →Single-Member LLC
An LLC with only one owner. Taxed as a disregarded entity by default (like a sole proprietorship) but provides liability protection.
This glossary covers the most commonly referenced terms. Additional terms will be added regularly.
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