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Business Entities: Which Business Types Are Right For Your Company?
LLCs, S Corporations, C Corporations – there are so many different types of business entities, it can seem overwhelming when you’re trying to decide which direction to take your company. Each of these business types has its own advantages and disadvantages when it comes to taxes, protection from creditors, operations, and other areas. So, before you make a move, remember that evaluating your needs and understanding these forms of business entities could be the difference between success and failure. So what’s a confused business owner to do? Let’s take a look at each of the business entities mentioned above to determine which one best suits your needs. Business Types: The C Corporation C Corporations (or simply – corporations) are considered by law to be unique business entities separate from those that own it. Think of the C Corporation as an individual, who can be taxed, sued, and can enter into contractual agreements. Corporations are owned by shareholders, who elect a board of directors to oversee the major business decisions and policies. When ownership changes in a corporation, the corporation does not dissolve. These forms of business entities have many advantages. For example, they’re said to have a lower risk of government audits (as opposed to sole proprietor or LLC), owners have limited personal liability for business debts, the cost of benefits can be deducted as a business expense, there’s no limit on the number of stockholders – the list goes on and on. Business Types: The S Corporation An S Corporation (also known as a standard business corporation) is simply a C Corporation that elects a special tax status with the IRS. S Corporations are pass-through tax entities – meaning that income or loss generated by these business entities shows up on the personal income tax return of the owners. With a C Corporation, profits and losses are taxed directly to the corporation (this can lead to double taxation.) Both business types offer the same limited liability protection and follow the same formalities, like annual shareholder and board meetings. Business Types: The LLC Like owners of S Corporations and C Corporations, LLCs enjoy limited personal liability. By contrast, sole proprietors and partners have unlimited personal risk. Both S Corporations and LLCs allow owners to avoid "double taxation" and to pay income taxes on a flow-through basis like sole proprietors and partners. Compared to an S Corporation, an LLC is simpler and faster to form, no annual meetings or formalities are required, members can split profits/losses in any way they choose, and an LLC can be owned by any combination of individuals or business entities. Only US citizens and resident aliens may own an S Corporation. LLCs are quickly becoming the preferred business entities among small business. Still confused? I’ve found that this Business Type Comparison chart created by "Folksonomies" A New Viral Marketing Tool A new consumer phenomenon is called "tagging" or "folksonomies" (short for folks and taxonomy). Tagging is powerful because consumers are creating an organizational structure for online content. Folksonomies not only enable people to file away content under tags, but, even better, share it with others by filing it under a global taxonomy that they created. Here's how tagging works. Using sites such as del.icio.us - a bookmark sharing site – and Flickr - a photo sharing site - consu. . .
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