When you start any kind of business, you will have to think about the type of business structure that will be right for you. There are three typical forms of incorporating. You can look for example at an LLC vs S Corp and decide from there how your business will work best. Let’s look at the difference between each one and the benefits each one has depending on your business.
The LLC stands for Limited Liability Company and along with closed corporations or C corporations as well as S corporations are the best business structures to use. This is because the company owners are not held liable for company debts as you would get with a partnership or sole proprietorship’s.
The difference between the C Corp vs LLC vs S corp is that the C Corporation is taxed double. With the LLC and S Corporation the taxes for the company are known as a pass through and given through the owners on their personal tax returns.
There are only minor differences in the way each type of business runs according to the structure. If you want to have a business that is easy to operate and that offer flexibility then you should choose an LLC. If you want to save of employment taxes, then you should go for the S corporation.
With the S corporation it runs pretty much the same way as a C corporation with the record keeping procedures and various profit sharing rules. There are strict regulations in place for each owner to get his or her share of the company profits according to the capital outlay they invested.
With an LLC the profits can be shared any way the owners see fit and there are no policies and procedures that need to be followed in terms of keeping records and financial data. The main difference with these two business forms comes in with the employment taxes. The owners of an LLC are considered to be self employed and therefore subject to the self employment tax of 15 percent. Carefully weigh the different incorporating structures to see which may be most appropriate for your unique business.