The language associated with starting a business is unique.
Using the correct business terms makes you look more
professional and helps others understand exactly what you are
trying to communicate to them. There are also important legal
reasons to use specific language when describing your business.

Here is a list of familiar (and not-so-familiar) terms that can
help you learn the language of business:

1099 -  A Form 1099 must be filed to report payments totaling
more than $600 or more made to any individual for rents or
services performed in the course of a calendar year. If this
form is not filed, you may be subject to penalties from the IRS.
1099 Workers are not employees and are responsible for reporting
their own income.

Accrual basis – A method of accounting that charges all income
and expenses to the period to which they apply, regardless of
whether money has been received. 

Balance sheet – A financial statement that shows the total
assets, liabilities, and equity of a business. 

Corporation – A legal form of operation under which the business
is recognized as a separate legal entity guided by a group of
officers known as the board of directors. Corporations are owned
by stockholders who invest capital into the corporation.
Stockholders are not personally responsible for the debts of the
corporation (unless they have personally guaranteed them), thus
reducing their liability to the limit of their investment.
Chartered or registered in the state in which it resides, a
Corporation can acquire and sell property, lend money, sue, be
sued, and can survive the death of its owners. 

C Corporation – A Conventional Corporation, the C Corporation is
the most common form of a corporation.  

Contractor – Also known as "Independent Contractor." Contractors
are responsible only for the work they do. Contractors are
generally specialists hired to do a specific job. Payments made
to contractors are reported to the IRS on Form 1099 and are
responsible for reporting their own income taxes.  But be
careful! The IRS has very specific rules determining the
difference between a contractor and an employee. If the IRS
feels an individual should have been treated as an employee, you
will be liable for payroll taxes that should have been withheld
and paid, plus any interest and penalties. To be a contractor,
the person has to operating a business of his or her own. 


Contract employee - An employee who is hired for a specific
purpose defined under the terms of a contract. The term is
sometimes used to describe Independent Contractors whose
earnings are reported on Form 1099. However, use of the term in
this manner is technically incorrect, since an independent
contractor cannot be an employee.  


DBA – "Doing Business As." Also known as "Fictitious Name." Any
name other than your own under which you do business. For
example, if your name is John Smith and the name of your
business is "Paper Cutters," you would register your business as
John Smith, doing business as "Paper Cutters." 

Disclosure agreement – A form of protection that safeguards an
idea during its developmental stage. Also see "Non-disclosure
agreement." 

EIN – "Employer Identification Number." Also known as "Employer
Tax Identification Number." The number issued by the IRS by
which the employer is identified. Employers may apply for an EIN
by filing IRS Form SS-4. 

Entrepreneur  - A somewhat vague term typically used to describe
anyone who goes into business for themselves or who develops a
new idea for a business venture. 

Free agent  - The term "free agent" was developed to refer to
independent workers who are hired for specific, typically
short-term, professional jobs. The term is somewhat vague, as it
has been used by independent contractors, consultants, and
almost anyone else who has their income reported on Form 1099. 

Freelance – Freelance workers are independent contractors who
perform work-for-hire. The term is most often applied to writers
and other providers of specific professional services.
Interestingly enough, the original "Freelancers" were knights
who were available to be hired to fight in battles for feudal
lords, hence the term "Free Lance." 


LLC – "Limited Liability Company." A business form allowed in
many – but not all – states. Operates like a traditional
business partnership, distributing income and income tax to the
partners which they report on their individual income tax
returns. The LLC structure protects partners from personal
liability for the business's debts. LLC's carry significant tax
benefits over a limited partnership. 


Non-disclosure agreement – provides legal protection preventing
the sharing of confidential information or "trade secrets" that
might benefit a competitor. 

Partnership – an agreement between two or more individuals who
are in business together. There are several types of
partnerships.  

Schedule C – the IRS form used for filing business income &
expenses as an adjunct to form 1040

Self employed – anyone who is in business for him or herself. A
self-employed person is responsible for filing their own
quarterly taxes and other tax responsibilities. Their income is
reported to the IRS on Form 1099. 
 
Sole proprietor – a business with only one owner.

Subchapter S or S Corporation – A for of corporation that pays
out all income proportionately to their shareholders, who then
claim the income on their personal income tax returns. 

Temporary worker – an employee hired on a temporary basis,
typically for a specific purpose. Temporary workers are often
hired to replace absent employees or for seasonal work, such as
extra retail workers hired during the holiday shopping season.
Temp workers can be hired as employees or independent
contractors.

W2 – The form used by employers to report wages and earnings of
an employee to the IRS.