Date post: | 07-Aug-2015 |
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Law |
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American Incorporators Ltd.
Which entity should I use to set up my business?
C-Corporation S-CorporationLLC
When starting a business, there are a number of choices to make.
One of the first is how to incorporate.
It can seem daunting in the beginning, but with a few pointers from American Incorporators you'll have a better feel for formation.
The ScoopUsed widely by the big boys, but also by smaller and medium-sized businesses desiring an unlimited number of shareholders.
C-Corporation
Sets you up for success if you are:
- Seeking venture capital- Taking on equity investors - Plan to be a publicly traded company in the future
Pros
Cons
C-Corporation
More paperwork than LLCs
The potential to have both profits and dividends taxed - the dreaded "double taxation"
The ScoopGenerally, the Limited Liability Company (LLC) is the most popular type of incorporation for small businesses.
LLC
Limits personal liability for business debts and agreements
A pass-through entity for tax purposes
Fewer requirements around corporate meetings and formal paperwork
Not setup for raising venture capital and equity
Pros
Cons
LLC
The ScoopCommon among all sizes of businesses, the S-Corporation option sets a cap of 100 shareholders.
S-Corporation
Avoid double taxation
Pass-through profits or losses to shareholders to include on individual tax returns
Flexibility to advance to C-Corporation at a later date
There are limits on shareholders and stock restrictions that come with an S-Corp formation
Your business must meet certain requirements to qualify
Pros
Cons
S-Corporation