Compare Various Types of
Corporation
& Business Entities

Various Types of Corporations

Learn more about the most important business entities; LLCs, S Corp, C Corp and nonprofits. Having a good understanding about all these, it will be easier for you to decide which business entity you should incorporate for your business.

Limited Liability Company

The Limited Liability Company (LLC) is currently considered among the most dominant business structures within smaller companies, for various reasons:

• Mostly, it is not very expensive to form an LLC
• LLC is easier to run if compared with other corporations.
• It has a simple business structure.
• Setup of LLC is quick and simple.
• LLCs has lesser rules and regulations and legal compliances.
• LLCs are regulated and formed on a state level.

The cost and policies governing an LLC do very from state to state. Checkout our LLC state information resource for additional info on your state.

LLC Limited Liability Protection

C Corps and S Corps tends to provide limited liability protection to their owners. Similarly, LLCs also provide limited liability protection to its owners. This implies that all the business assets are not in the possession of the owners but own by the LLC, separately. So if a business has any liability, it is wholly the liability of that business and has nothing to do or have any impact on the personal assets of individual owner.

LLC Taxes and Tax Return

Federal income tax is not paid by the LLC. LLC is eligible for ‘pass-through’ taxation, which implies that the company’s income taxes are just reflected on each owner’s personal tax return, not at the level of business.

Types of Tax LLC is Liable For

There are indeed particular types of tax that the LLC is liable for, such as:

• Payment of payroll tax on each employee salary.
• There will also be sales tax on every item purchased for or by the business.
• The tax on the properties owned by the business is the liability of LLC.
• Most often, these kind of taxes are deducted as a business expenses and don’t concern individual owner tax returns.
• There are some other types of taxes as well that LLC is liable to pay.

Subchapter or Small Business Corporation (S Corporation or S Corp)

Witnessing your small business begin to flourish and cultivate into a well-reputed company is like a dream come to true. But with the growth of your company, the rate of tax also tends to elevate. Companies in development struggle with a lot of intricacies in the season of tax, and this is when you should start to form S Corporation. It is a kind of business entity that provide considerable tax compensations while keeping the flexibility of your ownership intact.

S Corporation Tax and Tax Returns

S Corporation is not liable to pay the corporate income tax. It is quite similar to the LLC, which means that all the profit or loss produced by S Corporation will only impact the personal income tax returns of the owners and shareholders, and only they be liable to pay tax on that.

Forming an LLC But Paying Tax as an S Corp

You are always offered with an option to choose to be treated like S Corp for the purposes of taxations, whenever you create an LLC. This can be very beneficial for many business types:

• The rules and regulations of a running S Corp are more arduous than running an LLC.
• To be taxed as an S Corp can be very beneficial for the owners and members taking their money out of business.
• You can decide on to pay yourself a “reasonable” salary and subtract monies above that as share dividend income. That supplementary income would not be subject to self-employment tax, while it would nevertheless be subject to personal income tax.