Entities

Below is a list of and basic characteristics of the common types of Entities:

C Corporations

This is the Standard Corporation.

• Independent Legal & Tax Entity separate from owners
• No limit to the number of Shareholders
• Taxed on Corporate Profits and Shareholder Dividends at a Corporate Tax Rate – may lead to "Double Taxation"
• Must hold Annual Meetings and Record Meeting Minutes
• Affords Limited Liability for directors, officers, shareholders and employees
• Can issue more than one type of Stock
• Shareholders do not need to be US Citizens or Residents
• Affords Perpetual Existence

S Corporations

This is the Standard Corporation, which has elected a special status by filing with the IRS.

• Independent Legal & Tax Entity separate from owners
• Pass Through Entity, so Shareholders report their share of Profit or Loss on their Individual Returns.
• Limited number of Shareholders that must be either US Citizens or Permanent Residents
• Must hold Annual Meetings and Record Meeting Minutes
• Can have only one class of stock.
• Affords Limited Liability for directors, officers, shareholders and employees
• Affords Perpetual Existence

Limited Liability Companies (LLCs)

This type Entity Formation is popular as it combines the tax flexibility of a partnership (more than one owner required) with the personal liability protection of a corporation.

• Independent Legal & Tax Entity separate from owners
• Taxed as Partnerships (if more than one owner) or Sole Proprietorship (if one owner)
• Pass Through Entity, so Shareholders report their share of Profit or Loss on their Individual Returns.
• No limit to the number of Shareholders
• Not required to hold Annual Meetings and Record Meeting Minutes
• Governed by Operating Agreements.

Partnerships

• General Partners remain personally liable for lawsuits filed against the business.
• One or more partners "manage" the business, while limited partners contribute capital.
• May not require official registration. May be required to file informational returns.
• Pass Through Entity, so Partners report their share of Profit or Loss on their Individual Returns.

Sole Proprietorship

• Owner remains personally liable for lawsuits filed against business
• No state filing required to form a Sole Proprietorship
• Easy to form and operate
• Owner reports business profit and loss on their personal tax return.
• Depending on the type of business may not afford the best tax advantages – please contact us to discuss.

Nonprofit Corporation

A nonprofit corporation is formed for purposes other than making a profit e.g. religious, educational etc. The nonprofit status is not automatic; a form with supporting information must be filed with the IRS.

• Directors are not usually responsible for the debts and liabilities of the nonprofit corporation
• A Nonprofit corporation can apply for both federal & state tax-exempt status.
• May be eligible for public & private grants
• 501(c) (3) Corporations can received tax – deductible donations from individuals.