LLC Business Formation
Limited Liability Company (LLC)
Do you know that setting up an LLC gives you personal asset protection?
Do you know that you also get business and tax flexibility?
Setting up a business as an LLC is a preferred choice for many new businesses.
Are you looking to raise capital?
Are you thinking of going public?
Do you expect to have a lot of shareholders?
Then this would be the perfect option to explore.
Can anyone form a corporation?
Generally, anyone who completes the articles of incorporation and pays the state filing fee can form a corporation. There are usually no residency or other legal requirements. However, many states require that directors and officers must be at least 18 years old.
Is there any difference between a C-Corp and an S-Corp?
The IRS allows corporations to choose to be taxed as either a "C corporation" or an "S corporation." Income from C corporations are subject to double taxation; that is, the corporation pays taxes on its net income, and then the shareholders also pay taxes on the income that they receive from the corporation. S corporations have only one level of taxation. The shareholders still have to pay taxes on money that they receive from the corporation, but an S corporation does not pay taxes on its net income. While the S corporation is popular among small business owners, C corporations have greater tax-planning flexibility and can shield shareholders from direct tax liability.
Is there any difference between an LLC and a Corporation?
Although an S corporation shares many of the same tax characteristics as an LLC, an LLC has more flexibility and fewer restrictions on ownership than does an S corporation. An S corporation must not have more than 100 shareholders, all of whom must be U.S. citizens or legal residents. An S corporation is also subject to more formalities, such as holding annual meetings and keeping corporate minutes. On the other hand, LLCs generally are not required to hold formal meetings, but an LLC owner may be subject to higher self-employment taxes than a comparable S corporation owner. That is because an S corporation owner is required to pay self-employment tax only on salary, but not on dividends from the corporation.
LLC, C-Corporation, or S-Corporation?
Compare and choose the right entity for your new business.
|Definition||Combines elements of a corporation and a partnership.||Separate legal entity with legal rights and liabilities that are different from shareholders (owners).||Separate legal entity with legal rights and liabilities that are different from shareholders but that offers tax advantages by the IRS.|
|Number of Owners||No limit||No limit on shareholder||100|
|How to Start||State regulated and Articles of Organization and required tax numbers.||State regulated. Need Articles of Incorporations, bylaws and tax numbers.||State regulated. Need Articles of incorporations, bylaws and tax numbers.|
|Management Control||Rests with management committee (owners or those shareholders).||Rest with the board of directors appointed by the shareholders.||Shared by owners shareholders.|
|Taxation||Taxes can be assessed several ways based on the structure of the company but is taxed once.||Profit is taxed to the corporation and then dividends to owners are taxed again.||Profits from the company are taxed once. Profits are split among owners.|
|Personal Liability||Liability limited to corporation assets unless a personal guarantee is signed.||Liability limited to corporation assets unless a personal guarantee is signed.||Liability limited to corporation assets unless a personal guarantee is signed.|
|Transfer of Ownership||Yes||Yes||Yes|