A corporation is a type of business entity that is organized under specific provisions of the General Corporation Law. A corporation must have shareholders, directors and corporate officers, and must be registered with the state. In addition, the corporation will be taxed at the state and Federal level on its earnings.
A corporation offers the protection from personal liability for the owners (shareholders). This 'corporate veil' of protection does not offer protection from liability in the case of fraud, failure to pay taxes, under capitalization of the corporation, or commingling of personal and corporate funds.
The "C" part of "C Corporaiton" refers to the designation of the corporation for tax purposes. Most major companies (and many smaller companies) are treated as C corporations for Federal income tax purposes. Keep in mind, since "C Corporaiton" is a tax designation, and not an entity type, some entities other than corporation (such as LLC) can elect to be taxed as "C Corporation". For corporations "C Corporation" is a default designation, and does not require any additional filings with the IRS or the state.
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Similar to the C Corporation, S corporation offers all the benefits of a corporation, but with a different tax structure. S Corporations, much like sole proprietorships and partnerships, pay no corporate income tax. S corporation's shareholders report the company's income or losses on their personal tax returns.
To elect your corporation to be taxed as S Corp you need to file S Corporation election with IRS and some states.
One of the biggest differences of S Corp tax designation over disregarded entities and partnerships is in the way payroll and self employment taxes are paid, which could result in tax savings. Despite the obvious tax benefits, S Corporation comes with several restrictions. Major restrictions are:
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LLC combines the limited liability protection of a corporation (hence the name) with the flexibility and pass through taxation of a partnership/sole proprietorship. Like the shareholders of a corporation, the owners (members) of an LLC are not personally responsible for the debts or liabilities of the LLC.
The LLC has no limitations on who may be involved, and it can be managed by its members or by managers. It is often more flexible than a corporation and it is well-suited for companies with a single owner.
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The answer to this question depends strictly on your specific needs and circumstances. We always recommend our clients to discuss your personal situation with a professional CPA or business attorney, however, it is equally important to educate yourself prior to scheduling appointments. After all, it is your business.