The type of company will have important tax implications down the road. Some entities are taxable at the entity level and some are pass-through entities where their losses and gains are passed through directly to their members. It is important to know what you are dealing with in order to file your taxes correctly.
For more information on entity, check out this article in our blog, The Seraf Compass:
The tax structure of the company is usually clear from the investment documents. The two most common forms are a C Corporation and an LLC. A C Corporation is denoted by “Inc”, “Incorporated”, “Corp.” or “Corporation” after the name of the company, and an LLC is noted by “LLC” or “Limited Liability Company” or sometimes, “Limited” in other jurisdictions.
If you cannot tell for sure which type of entity you are dealing with, you can look at the document to determine which state the company is based in, and go to that state’s Secretary of State or Division or Corporations website and do an entity search to look up the formation papers of the company. Every state has such a site and it is much easier than it sounds.