Launching a start-up is an exciting venture, but one which takes adequate time and research to do properly. Thousands of businesses are formed every day with the help of certified registered agents; if you are planning on founding a corporation or LLC in the near future, we can help manage and streamline the process. We can help you sort through the benefits of each type of corporation below and help you choose the one which will allow you to take advantage of the best tax structure for your business.
This is the most common type of corporation. It’s a business entity in which its profits are taxed separately from its owners. Therefore, if the business gets into financial trouble, you're unlikely to have to use your personal finances to make up for the deficit. A C-Corporation can have an unlimited number of shareholders, and it is flexible when it comes to shareholder rights and ownership. However, taxes for this type of business structure are usually more complicated than other business structures.
An S-Corporation, commonly referred to as an "S-Corp", is simply a corporation that has filed a document with the IRS to become a special type of corporation. By electing to be treated as an S-Corp, the corporation can avoid double taxation. Corporate losses, income, credit and deductions can be passed through to shareholders, rather than once to the corporation and once to the shareholders. An S-Corp only allows a specific amount of stock to be distributed and all holders must be United States residents. Shareholders rights are much simpler here and double-taxation that occurs with a C-Corporation’s income is eliminated.
This is when two or more people own and run a business together. There are two types of partnerships:
General partnership. In this arrangement, the partners work together to operate the business.
Limited partnership. Limited partners are investors only. They have no part in running the business. This type of arrangement has both general partners and limited partners.
In a partnership, profits and losses of the business pass through to the partners, so the business avoids double taxation. However, if something goes wrong with the business, the partners will be personally reliable for the financial losses.
Limited Liability Company
A limited liability company or “LLC” is a hybrid between a partnership and corporation. Forming an LLC will create a legal entity distinct from its owner “members” granting limited liability like a corporation, but will have fewer formalities like a partnership in terms of taxes and centralized management. LLCs are not taxed as a separate business entity and all profits and losses are "passed through" the business to each member of the LLC. The LLC members report any profits and losses on their personal federal tax returns, just like the owners of a partnership would.
In a sole proprietorship, a single person is responsible for operating the business and is personally responsible for the business' finances.