A Limited Liability Company (LLC) blends the aspects of corporations, partnerships and sole proprietorships into a simple and flexible business entity. LLCs offer the same personal liability protection as corporations with few corporate formalities. LLC entities can be used to hold property and transact any type of business. They protect the owners and operators from personal liability similar to a corporation, and they possess the "pass-through" tax benefits of a partnership. Additionally, LLCs do not require the typical formalities that are required when managing a corporation.
What is a Corporation?
A corporation is a legal entity created separately from those who own and operate it. As a separate entity, the corporation's debts and taxes are separate from its owners (shareholders), thereby offering the greatest personal liability protection of all business structure. Corporations also offer tax savings and the ability to raise capital under your business name.
S Corporation is a tax designation used to dictate how your business is taxed by the IRS. New corporations, as well as LLCs considering corporate taxation can choose between filing taxes as a C corporation (C-Corp) or an S Corporation (S Corp). An S Corp is considered a pass-through entity, which means the business itself isn't taxed. Instead, income is reported on the owners' personal tax returns. Businesses taxed as C Corporations are not pass through entities. Income is taxed at the corporate level, and, if dividends are distributed, at the individual level as well. By choosing a Corporation or LLC with Inc Authority, you are able to select an S Corporation as your tax filing status. You have 75 days after formation to file this designation with the IRS.
Unfortunately, at this time, we are unable to process corporations for your selected state. However, a Limited Liability Company (LLC) might be a better option for your new business.
Did you know that Limited Liability Companies have become the number one choice for new business start-ups? That's because there are some distinct benefits of operating an LLC, instead of a corporation.
Asset Protection - In today's 'lawsuit-happy' environment, it's more important than ever to put a legal shield between you and your business. As a completely separate entity, LLCs separate the owners from the business itself. There is no personal liability for any LLC debts even if they relate to a contract or tort.
Tax Advantages - LLCs can elect how they are taxed. This is probably one of the best—but least understood—advantages of forming an LLC. You can decide whether it's better to file your taxes as a "disregarded entity" or to get corporate treatment. A disregarded entity is treated the same as a sole proprietor, so your LLC's income will be treated like personal income. If you choose corporate taxation, your business will be taxed at a lower corporate rate for the first $75,000 of income. Any LLC can choose this tax treatment by filing IRS form 8832. Both of these approaches can have big advantages, depending on how much income you personally want to take and how much you plan to reinvest in your business.
Ability to Raise Capital - When you start an LLC, it is simple to bring new owners (called members) on board, and there is no limit as to how many can be involved. These additional investors can be individuals, corporations, trusts, and pension plans, none of which even have to be in the same state or in the United States.
Easy to Operate - The LLC entity was formed around the principle of the freedom to contract. This basically means the owners only have to agree among themselves how the company will be run and the agreement will be held up in court. With an LLC, resolutions, amendments, meeting minutes, and annual board meetings are not required by law, as they are with corporations.