Want to start a new business this Year? Depending on your personal needs and the needs of your business, the choice between filing for an LLC or Corporation is an important one. There are certain advantages and disadvantages to either choice, which can affect your business, both short term and long term.
Corporations are a rather popular choice, but the individual must be clear as to which type of Corporation they choose: an S corporation or a C corporation.
S corporations are chosen more often than not, as they avoid a double taxation. This is in contrast to their counterpart, the C corporation. In an S corporation, the companies’ income, losses, and tax credits are passed through to the corporation’s shareholders and are only taxed once. There are limits on the type and number of owners in an S corporation. Owners can only be U.S. citizens and residents. There can be no non-residents, corporations or partnerships as owners of an S corporation.
In a C corporation, the corporation and the shareholders are each taxed, due to the fact that the corporation is viewed as a separate entity and is characterized as an individual taxpayer by the IRS. The advantage of the C corporation is that the corporation itself is held legally liable for the actions of the corporation and not the shareholders.
LLC (Limited Liability Corporation)
A LLC combines the limited liability attribute of a corporation with the favorable taxation treatment and structural flexibility attributes of a partnership. Depending on the desires of the members of the LLC, the LLC may be structured to resemble a sole proprietorship, a partnership, or a corporation.
An LLC can have an unlimited number of members, and the members can be non-U.S. citizens or residents. The members of a LLC are also provided liability protection by the LLC. This means that the personal assets of the members will be protected against debts, losses, and any court rulings against the business.
As far as taxes are concerned, LLCs are pass through entities, which means that the taxes will be passed through to the personal tax return of the member. This can prove to be easier for many people. On the other hand, the members can choose to have the LLC be taxed as a corporation if they would like.
Owners of LLCs must keep one thing in mind, the owners must make sure they don’t pierce the “corporate veil.” This means the owners must operate their LLC as a separate entity. The owner must maintain a distinction between his own personal affairs and the LLC.
Call the Orange County Business Attorneys/Lawyers at Distinct Law Group today to form your corporation or LLC.
Corporation, LLC, S Corporation, C Corporation, Limited Liability Corporation, Orange County Corporation, Orange County Business Attorney, Orange County Business Lawyer, Orange County LLC, Corporation Formation