One of the most significant decisions you’ll make for your business is what corporation type you’ll be filing it under. This choice will affect your taxes and personal liability for the company. Each type offers different limitations and benefits. Consider seeking business formation consulting if you’re unsure which corporations will be the most suitable for your business.
C-Corporation (C-Corp)
C-corps are the default for for-profit corporations unless otherwise specified. They are legally and financially separate from their owners and are an excellent choice if you intend to rapidly grow your business, plan to publicly trade the company in the future, or have multiple investors. You’ll pay corporate taxes at the federal and state levels, which are separate from your personal taxes.
S-Corporation (S-Corp)
Federal taxes flow through shareholders based on the number of shares they own. Profits and losses flow directly through owners/shareholders, avoiding double taxation. However, the qualifications to file as an S-corporation vary between states, so it is best to consult company formation accountants and an attorney before filing under this classification.
Limited Liability Corporations
An LLC provides the same legal separation as a corporation but has a looser structure since it doesn’t involve shareholders. It’s an excellent choice for a small business with one or two owners who still want the legal separation of a corporation but don’t intend to expand rapidly.
Sole-Proprietorship/Partnerships
Proprietorship offers no legal distinction between you and your business. Your business profits will be considered your legal income, and you’ll file them under your taxes. Partnerships are the same, just split between two or more people who will each cover their part of the business’s losses and profits. Business formation consulting can help you determine if this option suits your requirements.
JBB & Associates LLC can help you determine which business type is best suited for your new business with expert business formation consulting.
