United States Accounting & Tax Glossary

A C-corporation is a US business entity taxed separately from its owners under Subchapter C of the Internal Revenue Code. It pays 21% federal corporate income tax on profits, and shareholders pay personal tax on dividends — the 'double taxation' of C-corp profits. Most VC-backed startups are Delaware C-corps.

The Employer Identification Number is a 9-digit federal tax ID issued by the IRS to identify a business entity. Required for any entity with employees, all C-corps, S-corps, multi-member LLCs and partnerships. Single-member LLCs without employees can use the owner's SSN but commonly get an EIN for banking and 1099 reporting.

Form 1099-NEC reports non-employee compensation (independent contractor payments) of $600 or more in a calendar year. Issuers must send 1099-NEC to recipients and the IRS by 31 January of the following year.

An LLC is a US business entity that combines limited liability with flexible tax treatment. Single-member LLCs default to disregarded entity status (taxed as sole proprietor on Schedule C). Multi-member LLCs default to partnership taxation (Form 1065). LLCs can elect S-corp or C-corp tax treatment via Form 8832/2553.

An S-corporation is a US entity that elects pass-through taxation under Subchapter S. The corporation itself pays no federal income tax; profits flow to shareholders' personal returns. Limited to 100 shareholders, all US individuals (or certain trusts), and one class of stock. Owner-employees must pay 'reasonable compensation' as W-2 wages subject to FICA.

US self-employed people, freelancers and partners must pay estimated federal income tax (and self-employment tax) quarterly via Form 1040-ES. Due dates: 15 April, 15 June, 15 September, and 15 January of the following year.

Federal Corporate Income Tax is the US federal tax on C-corporation taxable income. It is a flat 21% rate (post-TCJA, since 2018). S-corporations, LLCs and partnerships are pass-through entities and do not pay federal corporate income tax — profits flow to owners' personal returns.

Form 1065 is the annual return for US partnerships and multi-member LLCs taxed as partnerships, due 15 March for calendar-year filers. The partnership does not pay federal income tax; profits flow to partners via Schedule K-1.

Form 1120 is the annual federal income tax return for US C-corporations, due 15 April for calendar-year filers (15th day of the 4th month after fiscal year-end for fiscal-year filers). Six-month automatic extension available via Form 7004.

Form 1120-S is the annual federal income tax return for US S-corporations, due 15 March for calendar-year filers. The corporation does not pay federal income tax; instead, each shareholder receives a Schedule K-1 reporting their share of income, deductions and credits.

Section 1202 of the Internal Revenue Code allows founders and early investors in qualifying C-corps to exclude up to $10 million (or 10× basis, whichever is greater) of capital gain from federal tax when they sell their shares, provided the stock has been held for at least 5 years and several other tests are met.

Self-employment tax is the US federal tax that covers Social Security and Medicare contributions for self-employed people, sole proprietors, and partners. The combined rate is 15.3% (12.4% Social Security + 2.9% Medicare) on net self-employment earnings.