What business type is right for you?
When you're starting a new business, you want to determine the business structure that's right for you. What's the difference between a limited liability company (LLC) and a corporation (Inc.)? And how is a C corporation different from an S corporation? Use these charts to help decide what business type is best for your needs.
LLC vs. Corporation
Limited Liability Company (LLC)
Corporation (Inc)
Shields personal assets from business liability
Shields personal assets from business liability
Requires separation of business and personal finances
Requires separation of business and personal finances
Allowable in all 50 states and the District of Columbia
Allowable in all 50 states and the District of Columbia
Highly flexible management structure
Highly flexible management structure
Flexible tax reporting options
Flexible tax reporting options
Preferred by outside investors
Preferred by outside investors
Preferred for IPO
Preferred for IPO
Recognized outside of the United States
Recognized outside of the United States
What is an S corporation?
After you create a corporation or LLC, you also have the opportunity to decide how you'd like your business to be taxed.
Single owner LLCs can be taxed either as a sole proprietorship or a corporation. LLCs with more than one owner can be taxed either as a partnership or a corporation. Income from LLCs treated as sole proprietorships or partnerships is reported directly on the owner’s individual tax returns.
New corporations, as well as LLCs considering corporate taxation can choose between filing taxes as a C corporation ("C corp") or an S corporation ("S corp"). An S corp is considered a "pass-through entity," which means the business itself isn't taxed. Instead, income is reported on the owners' personal tax returns. Businesses taxed as C corporations are not pass through entities. Income is taxed at the corporate level, and, if dividends are distributed, at the individual level as well.
We can help you understand your options so you choose what's best for your business. Talk to one of our network of attorneys today.
C-corp or S-corp
C Designation
S Designation
Owners pay personal income tax on profits
Owners pay personal income tax on profits
Business must pay corporate income tax
Business must pay corporate income tax
All business income/loss is passed through to owners each year.
All business income/loss is passed through to owners each year.
No more than 100 shareholders
No more than 100 shareholders
Shareholders must be U.S. citizens or resident aliens
Shareholders must be U.S. citizens or resident aliens
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