A corporation is also considered an established business entity, which looks more attractive to investors. A C corp structure is a good choice for startups with long-term goals of going public or for businesses requiring ample investment capital. How an S Corporation Pays Taxes and Avoids Double Taxation Problems. Pros An LLC is still simple to open and maintain as most states only require an annual LLC filing and fee to keep the LLC open, but the LLC does not file a separate tax return. Pros and Cons of Running an Illinois LLC. LLC vs LLP comparison. In contrast, when you have a partnership or sole proprietorship, there isn’t a clear line between the owner and the business, so you can be held personally liable if the busine… They can either represent an individual or a group and like all other structures, it has pros and cons that you should be aware of before deciding whether or not an LLC is the best formation for your new company. Corporation. An LLC with two or more owners is called a multiple-member LLC, and has the choice to be taxed as a partnership, an S corporation, or a C corporation. The pros: Incorporating as a sole proprietor allows the owner to do several things that they would be unable to do with any other entity. LLC Pros: The owner of a single member LLC doesn't have to file a tax return for the LLC, as they only report the activity on their personal tax return. S corps are subject to closer IRS scrutiny. Of course, the majority of the businesses in this country are not publicly traded, so it makes sense that the LLC is the more popular choice. Most states require the following steps to form a C corporation: The main advantage of having a C corp is the personal liability protection. No need to spend hours finding a lawyer, post a job and get custom quotes from experienced lawyers instantly. Forming an S corp is also similar to forming a C corp. You form a corporation or LLC by filing a “certificate of formation” with the Texas Secretary of State. Limited liability companies (LLCs) and corporations are the two most popular business structures available. The United States deems that the C-corporation structure is the default incorporation to use when forming a business. An LLC or Corporation provides personal liability protection for business owners (though this does not eliminate your need for general liability insurance). An LLC also provides greater flexibility in ownership and taxation. Although it isn't required, you should also consider creating an operating agreement for your LLC, which details member's rights and interest percentages. The company pays employees' salaries while deducting payroll expenses. An LLC has an advantage over every other type of business structure when it comes to options for federal tax purposes. If you own a storefront, this entity might no… Pros and Cons of Filing as an S Corporation Although there are plenty of benefits of filing an LLC as an S Corporations, it isn't the best option for everyone. An LLC may be taxed as a disregarded entity, partnership, S-Corp or C-Corp. A Limited Liability Partnership (LLP) and a limited liability company (L.L.C. Pros and Cons of LLC An LLC is a relatively new type of business structure that most states permit. Comparing LLC vs. corporation pros and cons? The IRS classifies an S corp under subchapter S of the Internal Revenue Code. 1. INC Pros and Cons • Taxation: A corporation is taxed on its profits, and shareholders are also taxed on any distribution of profits they receive, effectively amounting to double-taxation. ... What Is a Limited Liability Company (LLC)? Chiefly among them is the ability to be the boss. Are you considering setting up your Illinois business as a limited liability company? When you are starting a business, choosing the right type of entity is one of the most important decisions to make. They have quickly become the more popular choice, however. Continue reading for more details about these two types of business incorporation. Taxes: Corporations may only be taxed as C-Corps or S-Corps. Having a business of any type exposes you to liability. An LLC can be an S-corp – or even a C corporation – depending on how the business owner chooses to be taxed. Corporations, Formation, LLC, Small Business. Andrew L. … If you need help weighing LLC vs. corporation pros and cons, post your legal need on UpCounsel's marketplace. Rather the term refers to the way in which the business chooses to be taxed. Incorporating makes your business a standard C corporation. An LLC also offers corporate-style liability protections. Pros and Cons of Limited Liability Corporations (LLC) With the limited liability characteristics of a corporation and the convenience of a flow-through income taxation (where the income of the business is filed as part of the owner’s personal income and not taxed separately), this option is suitable for multiple ownership circumstances. Many companies find the S corporation status too confining, outweighing the benefits. Perpetual operation even if an owner dies or leaves the company. This means the owners can’t be held personally liable if the business is sued or has debts. For more information see the Virginia State Corporation Com… Was this document helpful?       Name a registered agent that will receive the formal documents for the company. Unlike a corporation, an LLC isn't taxed directly. To become an S corporation, the company must make a special election with the Internal Revenue Service. An S corp is not an official business entity. 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