Side By Side Features of A C Corp - S Corp - LLC

Formation and Business Structure:

When starting a new business, everyone has a lot to consider regarding the business structure, its complexities, management system, asset protection and most important tax treatment. Every business form has its own unique characteristics.

Choosing a suitable business entity for your business is the most important and crucial step for every owner and investor and could be quite confusing if you have no knowledge of the several business entity choices available and their different corporate and tax treatment. A different state is generally considered for the asset protection rather a tax structure.

Other than home state can also be one of the options to establish a company for the asset protection such as larger companies generally prefer Delaware.

A Corporation is a legal entity and it is used to run a large company with , directors and investors. The owners of the corporation are called shareholders. After forming a corporation you must also elect a board of directors to oversee the company and you must elect corporate officers to execute and run the day to day business.

Corporate structure is generally recommended for a company that want to go for trading, service or publicly on a stock market through an Initial Public Offering. They are suitable for business that need to raise large amounts of money through the issuance of shares.

Additionally, corporations are required to hold annual meetings, record all meeting notes and issue shares to the stock holders. So if you are going to go to New York or any other stock exchange you make a c corporation. If you are having investors with IRAs and retirement accounts than you would probably have a corporation.

An S-Corporation does not have the double level of taxation, corporate and person, that a C-Corporation has. Instead, profits and losses are distributed among shareholders who report that income or loss on their own federal income taxes. This is the main advantage to electing S-Corporation status.

The Limited Liability Company or LLC is not a Partnership or a corporation. Limited Liability Company (LLC) is a relatively new business structure allowed by state statute. An LLC is a distinct type of business that offers an alternative to partnerships and corporations, by combining the corporate advantages of limited liability with the partnership advantage of pass-through taxation.

Asset Protection Comparison: All three types of entities provide more or less the same kind of protection of the personal assets of a business owner.

Payroll Restrictions: The owners of the limited liability companies are not allowed to take payroll, whereas A Corporation and S Corporation stockholders are required to take salary as an officer employee of the company.

Tax Effects: Generally, A good tax planning lowers the taxes rather an entity type.

Venture Capital Companies: Generally, advise to create a C Corporation rather an LLC or S Corporation.