Understanding Business Entity Types in GoCo: What You Need to Know
As your company grows and evolves, so too can its legal and tax structure. In GoCo, understanding and accurately setting your business entity type is super important, as it impacts various aspects of your HR operations, especially when it comes to reporting and benefits.
This article will walk you through what business entity types are in GoCo, what they mean for your organization, and how to manage them. Let's dive in!
What is a Business Entity Type?
A business entity type refers to the legal structure of your company. This structure determines how your business is taxed, its legal liabilities, and how it's managed. In GoCo, setting your business entity type helps us align with your operational needs and ensures accurate data representation across the platform.
GoCo's Supported Business Entity Types:
GoCo offers a comprehensive list of business entity types to match your company's unique structure. Here's a breakdown of the options you can select from:
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Individual (Sole Proprietorship): This is the simplest business structure, where the individual and the business are considered the same entity. There's no legal distinction between the owner and the business.
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Partnership: A business owned by two or more individuals who share in the profits or losses.
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C-Corporation (C-Corp): A legal entity that is separate from its owners. C-Corps can be taxed twice: once at the corporate level and again when profits are distributed to shareholders.
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S-Corporation (S-Corp): A special type of corporation that avoids the double taxation of a C-Corp. Profits and losses are passed through directly to the owners' personal income without being subject to corporate tax rates.
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Limited Liability Company (LLC): A business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.
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LLC (C-Corp Election): An LLC that chooses to be taxed as a C-Corporation.
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Limited Liability Partnership (LLP): A partnership in which some or all partners have limited liabilities. It exhibits elements of partnerships and corporations.
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Non-Profit Corporation: An organization that is not operated for the purpose of making a profit, typically focusing on charitable, educational, religious, or scientific purposes.
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Trust: A legal arrangement where one party (the trustee) holds property for the benefit of another party (the beneficiary).
Why is Your Business Entity Type Important in GoCo?
Setting the correct business entity type in GoCo is crucial for several reasons:
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Accurate Reporting: GoCo generates various reports, including benefit census reports. These reports pull data based on your current business entity type. If your entity type changes, historical reports will reflect the current setting, which can impact the accuracy of contribution rates, especially in benefit census reports. Keeping this up-to-date ensures your reports are always spot-on! 📊
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Tailored Functionality: For example, if you're an S-Corp, GoCo allows you to set up 2% shareholders, ensuring that specific tax and benefit considerations for S-Corps are accurately captured and managed within the system.
How to Edit Your Business Entity Type in GoCo
Updating your business entity type in GoCo is a straightforward process:
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Navigate to your Company Page
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On this page, you'll see your company details to the left. To reveal the business entity type field, click the "Edit" button.
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Once in edit mode, you can select the appropriate business entity type from the dropdown menu.
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After making your selection, be sure to "Save" your changes.
Important Note: Once you select a business entity type, you cannot unselect it. You can only change it to a different type. If your company's structure changes, be sure to update this setting promptly.
Potential Delays and Considerations
While GoCo aims for a seamless experience, be aware that changing your business entity type within the system may have a slight delay in reflecting across all areas, particularly those tied to benefits and payroll. This is often due to the complexities of integrating with benefit carriers and payroll providers.
Common Questions about Business Entity Types
Q: Can I leave my business entity type unselected? Yes, companies do not have to be set up with a type selected initially. However, we highly recommend selecting the appropriate type as soon as you have determined your legal structure to ensure accurate reporting and access to relevant functionalities.
Q: What if my business entity type changes after I've been using GoCo for a while? You can update your business entity type at any time by following the steps above. Just remember that reports will always pull data based on your current selection, so timely updates are key!
Q: Where can I learn more about the different business entity types? While GoCo helps you manage your HR processes, it's always a good idea to consult with a legal or tax professional for advice on which business entity type is best for your company. You can also find general information from reputable sources like the IRS website or the Small Business Administration (SBA).
If you have any further questions, please don't hesitate to reach out to our support team at support@goco.io. 💚