How should you register? C Corp? S Corp? LLC?

When you’re starting your business it’s important to make sure you set yourself up the correct way. One of the first decisions a person makes when they’re starting a business is how to file their organization. S corporation, C corporation, and LLC are different types of business structures that have different advantages and disadvantages. Here is a brief overview of each one:

• S corporation: This is a tax status that can be elected by corporations or LLCs that meet certain criteria. S corporations are not taxed at the corporate level, but rather pass through their income and losses to their shareholders, who report them on their personal tax returns. This can help avoid double taxation, which occurs when a corporation pays taxes on its profits and then its shareholders pay taxes on their dividends. S corporations also have limited liability protection, meaning that the shareholders are not personally responsible for the debts or obligations of the business. However, S corporations have some restrictions on their ownership, such as a maximum of 100 shareholders, only one class of stock, and only U.S. citizens or residents as shareholders

• C corporation: This is the default type of corporation that is formed by filing articles of incorporation with the state. C corporations are separate legal entities from their owners, and have limited liability protection as well. C corporations can have unlimited number of shareholders, multiple classes of stock, and foreign shareholders. C corporations can also raise capital more easily by issuing stock or bonds to investors. However, C corporations are subject to double taxation, as they pay corporate income tax on their profits and their shareholders pay personal income tax on their dividends

• LLC: This stands for limited liability company, which is a type of business entity that combines some features of a corporation and a partnership. LLCs are formed by filing articles of organization with the state, and have limited liability protection for their owners, who are called members. LLCs can have one or more members, who can be individuals, corporations, or other entities. LLCs are flexible in how they are managed and taxed. They can choose to be taxed as a sole proprietorship, a partnership, an S corporation, or a C corporation. LLCs are also less formal than corporations, and do not have to follow as many legal requirements or corporate formalities

When in doubt consult a professional accountant or lawyer before your business formation. It can make a ton of difference to how your business operates, gets taxed, and grows into the future.

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