LLC vs. Corporation vs. S-Corp
By : Raad Ahmed
April 2015
STEP 1: CHOOSE A LEGAL STRUCTUREMeaning setup an entity that will conduct business with other entities
S-CORPORATIONA standard corporation with a special tax status,
limited number of shareholders and limited liability for the owners
That sounds promising…
C-CORPORATIONA standard corporation with unlimited number of shareholders and
limited liability for the owners
KEY DIFFERENCES
S-CORPORATION C-CORPORATION
TAX PASS-THROUGH TAXES PAID BY THE C-CORPOWNERS PAY TAXES FOR THE S-CORP C-CORP PAYS TAXES FOR ITSELF
LIMITED NO. OF SHAREHOLDERS UNLIMITED SHAREHOLDERSS-CORP IS LIMITED TO 100 SHAREHOLDERS
SINGLE CLASS OF STOCK MULTIPLE STOCK CLASSESS-CORP CAN ISSUE ONLY 1 CLASS OF STOCK C-CORP CAN ISSUE UNLIMITED NO. OF CLASSES
NO STOCK OPTIONS FLEXIBLE STOCK OPTIONSS-CORPS CAN’T GIVE OUT STOCK OPTIONS C-CORPS HAVE FREEDOM IN ISSUING
EMPLOYEE STOCK OPTIONS
LIMITED LIABILITY COMPANYA company with limited liability of it’s owners and simple accounting
schemes, but also with limited privileges in civil procedures
LLC is usually avoided by investors and the
majority of startups
STEP 2: SEEK HELP FROM A LAWYERIt’s possible to do it yourself, but it’s a smart choice to include a lawyer in the process
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