Overview of Incorporated vs. Unincorporated Businesses
An unincorporated business is any business not registered with the state. It includes partnerships, limited liability companies taxed as partnerships, and sole proprietorships. For federal income tax purposes, income flows through to owners.
DC Unincorporated Business Franchise Tax
The DC franchise tax, also known as the unincorporated business franchise tax, taxes some DC businesses with gross receipts of $12,000 or more.
Incorporation vs Unincorporation: Liability and Taxation
The biggest difference between incorporated and unincorporated businesses is liability. Incorporated businesses protect owners from liabilities. Unincorporated businesses do not. An incorporated business becomes a separate legal entity, while unincorporated businesses do not.
Who is Subject to DC Unincorporated Business Tax?
An unincorporated business is not registered with the state as a legal entity. Owners are liable for debts. Most unincorporated businesses are sole proprietorships, owned and operated by one person. The tax taxes certain unincorporated DC businesses with over $1,000 gross receipts.