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Company Formation
We help you decide what type of company is best suited for your needs.
We help you choose between:
- LLC
- C corporation
- S Corporation
C corporation vs. S corporation vs. LLC.
C Corp |
S Corp |
LLC |
|
| Formation Requirements, Costs | Must file with state, state specific filing fee required | Must file with state, state specific filing fee required. | Must file with state, state specific filing fee required. |
| Liability | Shareholders granted personal protection from debts and liabilities of business | Shareholders granted personal protection from debts and liabilities of business | Separate entity from partners but members may be held liable for non fiscal obligations. |
| Administrative Requirements | Election of board of directors/officers, annual meetings, and annual report filing requirements. | Election of board of directors/officers, annual meetings, and annual report filing requirements. | Relatively few requirements. |
| Management | Shareholders need to elect directors, who manages business. | Shareholders need to elect directors, who manages business. | Memebers can setup their own structures |
| Term | Perpetual: can extend past death or withdrawal of shareholders. | Perpetual: can extend past death or withdrawal of shareholders. | Perpetual, unless state requires fixed amount of time. |
| Taxation | Double taxation (Company income is taxed at corporate tax rate; shareholders also pay tax on dividends or profits distributed) | Profits and losses pass through the corp and reported to the individual tax return of shareholder | Profits and losses pass through the LLC and reported to the individual tax return of shareholder |
| Self-Employment Tax Break | Salary subject to self employment tax. | Profits of the S-Corp which pass through to the shareholders are not subject to self-employment tax. Rather, self-employment is only taxed on the portion classified as a "reasonable salary". | LLC members must pay self-employment tax on all income from the LLC. |
| Formalities | Must file an C-Corporation annual income tax return each year (IRS Form 1120). Must file annual report with Secretary of State, and a reporting fee of $25 and a statement of information are required 90 days after formation. Must maintain corporate formalities such as: Drafting Bylaws, Minutes, Annual Meetings, issuance of stock, to keep a paper a trail of financial dealings between the corporation and its shareholders, and to avoid "piercing of the corporate veil. |
Must file an S-Corporation annual income tax return each year (IRS Form 1120S). Must file annual report with Secretary of State, and a reporting fee of $25 and a statement of information are required 90 days after formation. Must maintain corporate formalities such as: Drafting Bylaws, Minutes, Annual Meetings, issuance of stock, to keep a paper a trail of financial dealings between the corporation and its shareholders, and to avoid "piercing of the corporate veil. |
Very little formalities required. Operating agreement is recommended, annual meetings not required. A reporting fee of $25 and a statement of information are required 90 days after formation and then every two years. |
| Continuity of Life | Indefinite term | Indefinite term | Indefinite term |
