Choosing The Right Entity Structure For Your Business?
You're going to be starting a business but you're unsure where to start and what entity structure it is going to be under? Figuring out what entity structure you should have for your business is the first step of beginning your business, and we cover what you should know to select the correct one for your business.
Should I form an S corp, C corp or LLC?
An LLC, which stands for "Limited Liability Company," is a type of business structure that lets you classify your business as a separate entity from you personally. This allows you to keep your assets separate from your business assets, and protect them from your business' debts and liabilities. You can open bank accounts, enter contracts, hire employees, and obtain business licenses and permits under your LLC. Most states require an annual filing and fee to keep your business in good standing.
What is an S corporation?
An S corporation, also known as an S subchapter, refers to a type of corporation that meets specific Internal Revenue Code requirements. The requirements give a corporation with 100 shareholders or less the benefit of incorporation while being taxed as a partnership. The corporation may pass income directly to shareholders and avoid double taxation. Requirements include being a domestic corporation, not having more than 100 shareholders—which includes only eligible shareholders—and having only one class of stock.
What is an C corporation?
A C corporation (or C-corp) is a legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity. C corporations, the most prevalent of corporations, are also subject to corporate income taxation. The taxing of profits from the business is at both corporate and personal levels, creating a double taxation situation.
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