Limited Liability Company (LLC)

The Limited Liability Company (LLC) is one of the most popular business structures for small and medium-sized enterprises due to its affordability and ease of management compared to other corporate forms. It offers flexibility and simplicity, making it an attractive choice for many entrepreneurs.

Do C Corps and S Corps Offer LLCs?

Typically, LLCs are distinct from C Corporations and S Corporations. However, business owners can choose to form an LLC instead of these corporate structures based on their specific needs.

Is an LLC Subject to Federal Income Tax?

LLCs are generally exempt from paying federal income tax at the company level. Instead, they benefit from "pass-through" taxation, meaning the company’s profits and losses are reported on the individual tax returns of the owners, avoiding double taxation.

C-Corporation

A C Corporation is a legal business entity established at the federal level, recognized as a separate entity from its owners. It provides a clear distinction between the company’s legal responsibilities and those of its shareholders and management. Unlike other business structures such as LLCs, S Corporations, or Sole Proprietorships, a C Corp offers a unique framework for ownership and governance.

Why Is a C Corp Considered a Separate Legal Entity?

Because a C Corporation is legally separate from its shareholders, the company itself assumes responsibility for its debts and obligations. This separation protects the personal assets of directors, investors, and shareholders. Additionally, C Corps can distribute profits to shareholders in the form of dividends or bonuses.

S-Corporation

Watching your startup grow into a successful company is rewarding, but as your business expands, tax obligations can become more complex and costly.

Why Is an S-Corporation Beneficial During Tax Season?

For rapidly growing businesses, managing taxes can be challenging. Forming an S Corporation offers significant tax advantages, especially for small businesses, by allowing profits and losses to pass through directly to owners’ personal tax returns, often reducing overall tax burdens.

Non-Profit Corporation

A Non-Profit Corporation operates with a mission beyond generating profit. Unlike LLCs, S Corps, or C Corps, its primary purpose is to serve a cause or community, rather than distributing profits to shareholders. Any earnings are reinvested to support the organization’s objectives, and shareholders do not receive dividends.

Do Non-Profit Corporations Pay Employee Salaries?

Yes, Non-Profit Corporations typically pay regular salaries to their employees to support the organization’s operations and mission-driven work.