The type of business entity you choose will impact the way you maintain your records, the expenses that can be deducted and many other tax related implications. At Professional Tax & Accounting Solutions, LLC, our tax consultants are experienced with structuring all entity types to minimize tax liabilities and ease administration.
The type of entity you select for your business will be one of the most important decisions you will make and it can have both positive and negative consequences.
Some of the most common forms of incorporation are:
C Corporation – it is a separate legal entity from its shareholders. A C corporation can have unlimited number of shareholders, and those shareholders can be any kind of legal entity. The C corporation is subject to double taxation, once at the corporate level and once at the shareholder level. It provides legal and financial protection for the shareholders.
S Corporation – it is a separate legal entity from its shareholders and protects its shareholders from legal liability. The S corporation allows shareholders to claim their share of the corporation’s income directly on their personal tax return. It is limited to a maximum of 75 shareholders, each shareholder must be a U.S. citizen or resident and there can be only one class of stock.
General Partnership – is formed by two or more individuals who carry on a business for profit. Each partner is personally liable for the partnership’s debts and legal liabilities. In addition, each partner is jointly and severally liable for the acts of the other partner. For tax purposes, all partners are considered self-employed and claim their share of the partnership’s income on their individual tax returns.
Limited Liability Company (LLC) – is for the most part a combination between a corporation and a partnership. An LLC comes into existence when the Articles of Organization are submitted to the State. Its members enjoy protection from the liabilities and debts of the LLC. An LLC may be taxed as a partnership or an S corporation, so its members must report income and deductions on their individual tax returns.
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