General Corporations -"C" Corporations

The "C" Corporation is the most common form of ownership used by both small and large businesses.  It is a separate and legal entity that offers limited liability protection, unlimited life, easy to raise capital, complete flexibility of ownership, may have various classes of stock, free transferability of ownership and tax benefits.  One disadvantage for a small business is that income is first taxed at a corporate level at corporate tax rates.  Then when the corporation issues dividends to its shareholders, the same money is taxed again at the shareholder level resulting in the same income being taxed twice.   "C" Corporations must maintain corporate formalities such as annual meetings and other resolutions and have governmental regulations.

Subchapter S Corporations - "S" Corporations

A "S" Corporation operates primarily in the same manner as a "C" Corporation except in a "S" Corporation all earnings are passed directly through to the owners' personal income tax return avoiding the double taxation.  It also loses some of the tax deductions allowed to "C" Corporations.  However, there are certain requirements to qualify for the "S" status under the current IRS rules. If the federal election is approved, the shareholders are eligible to make similar election to the state.  If the state election is also made, shareholders of the corporation pay personal income tax on income earned by the corporation. 

Limited Liability Company - "LLC"

A "LLC" is an alternative to corporations and partnerships.  The LLC provides the corporate advantage of limited personal liability and the taxation advantage of partnerships.  As a flexible business entity, the LLC is an alternative to traditional forms of business.  

The members of the LLC are the owners of the business.  A member can invest in the LLC in exchange for a percentage of ownership interest.  In a member-managed LLC, the members act as the managers and are involved in the day-to-day operation of the business.   In a manager-managed LLC, specific managers are designated to run the business.