Llc Vs S Corp Vs C Corp Chart
Introduction
When starting a new business, one of the most important decisions you need to make is choosing the right type of business entity. There are several types of business entities to choose from, each with its own advantages and disadvantages. The three most popular types of business entities are LLC, S Corp, and C Corp. In this article, we will discuss the differences between these three types of business entities and provide a comparison chart to help you decide which one is right for your business.
LLC (Limited Liability Company)
A limited liability company (LLC) is a type of business entity that combines the liability protection of a corporation with the tax benefits of a partnership. In an LLC, the owners are called members, and they are not personally liable for the company's debts and obligations.
An LLC is a flexible business entity that allows for a variety of ownership structures, including single-member LLCs and multi-member LLCs. It also has fewer formalities and paperwork requirements than a corporation.
S Corp (S Corporation)
An S corporation (S Corp) is a type of corporation that has elected to be taxed as a pass-through entity. This means that the company's income, deductions, and credits are passed through to the shareholders, who report them on their individual tax returns.
To qualify as an S Corp, a company must meet certain eligibility requirements, such as having no more than 100 shareholders and only one class of stock. An S Corp also has limited liability protection for its shareholders.
C Corp (C Corporation)
A C corporation (C Corp) is a type of corporation that is taxed as a separate entity from its owners. This means that the company pays its own taxes on its profits, and its owners pay taxes on any dividends they receive from the company.
A C Corp has unlimited growth potential and can issue multiple classes of stock. It also has the most stringent formalities and paperwork requirements of the three types of business entities.
LLC Vs S Corp Vs C Corp Comparison Chart
The following chart provides a comparison of the key differences between LLCs, S Corps, and C Corps.
| Feature | LLC | S Corp | C Corp |
|---|---|---|---|
| Liability Protection | Yes | Yes | Yes |
| Taxation | Pass-through | Pass-through | Separate entity |
| Ownership | Flexible | Limited | Unlimited |
| Formalities | Few | Moderate | Many |
| Paperwork | Minimal | Moderate | Extensive |
Conclusion
Choosing the right type of business entity is a critical decision that can have lasting implications for your business. Each type of business entity has its own advantages and disadvantages, and it's important to carefully consider your options before making a decision. The comparison chart provided in this article can help you get started on your decision-making process.