The Three Types of Corporations that You Should Understand

What Are The Three Types Of Corporations: Before you let yourself get into trouble with the murky waters of choosing a type of corporationThe type of corporate structure, that is, which form of corporate entity you decide to use, is one of the single most important planning decisions a business can make when it’s time to consider tax advantages. It is usually one of the areas where the most misinformation is given and mistakes are made. Most businesses eventually choose to incorporate in some form or fashion, and this can have benefits for a professional corporation, both from a legal and a tax standpoint.

What Are The Three Types Of Corporations:

Before you let yourself get into trouble with the murky waters of choosing a type of corporation for your business, check out this overview of three types of corporations to learn more.

What is an S-Corp?

What Are The Benefits Of An S Corporation? When possible and under the right circumstances, S Corps are considered to be the “best of the best” of tax entities.

They offer the same legal protection as the other entities but have one major advantage: Earnings in excess of the shareholder’s salary are not subject to self-employment tax. And the savings are not in taxable income, but in actual tax to be paid. wise business plans can help you to create your s-corp and run your your dream business.

What Is C Corporation?

A C Corporation is one of a few different ways to lawfully recognize a business for tax, regulatory and official reasons. A C Corp is basically an approach to structure ownership of a business, and contrasts with other famous business structures including Limited Liability Companies (LLCs), S Corporations, Sole Proprietorships and others.

Wall-Mart, IBM, and other major corporations are C-Corporations. This is because business with 1) more than one class of stock or 2) more than 100 shareholders are not given the option of the S-Corp election.

What Are the Benefits Of C Corporation?

The stock is able to be widely traded. This makes raising capital much easier and also makes the ownership readily transferable. It allows for different classes of stock, which plays a major role when corporate decisions are at stake.

There are disadvantages to a C-Corp, also. The c corporation itself is taxed and then any earnings that are disbursed to shareholders, as dividends, for example, are also taxed. In effect, double taxation. As small business owners, there are few circumstances that would warrant taking this tax hit. if are thinking about creating your c corporation & looking for professionals,follow these simple steps to create your business entity.

What Does LLC Stand For?

Basically A LLC is the acronym for “limited liability company,” which has a few features of both partnerships and traditional corporations. This type of business provides its owners greater liability protection than individual ownership and may have interminable existence.

LLCs are probably one of the most popular entities for small business owners and with good reason: They are easy to form and they give the owner the benefit of limited legal liability.

What Are The Benefits Of An LLC?

If there is only one owner, they can be treated as a “disregarded entity”. This means they do not require a separate tax return and all income can be done on 1040 Schedule C. This saves money on tax preparation and is an easier process. There are a lot of circumstances where they are the most advisable approach. But they have one major disadvantage:

As a default, all of the earnings are considered self-employment income and are thereby subject to self-employment tax.

Remember, your company is unique, even though there may be a thousand other companies in the same business as you. Make sure to take the time to sit down with a professional and discuss your personal situation to see what approach will be the best for you.

If are looking for professionals for creating an LLC, these 4 simple steps to create your business entity might be helpful for you to run your dream business.

Ready to learn more? Check out the WISE LEARNING SERIES of educational e-resources!

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<div>Joseph Ferriolo <i class="fab fa-linkedin" style="color: blue"></i></div>
Joseph Ferriolo
Director at Wise Business Plans®
Joseph Ferriolo is the Director of Wise Business Plans. He has overseen over 15,000 written business plans during his tenure, raising over $1BN in funding and providing 30K+ consulting hours for startup companies.

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