types of businesses
The business structure you choose influences everything from day-to-day operations, to taxes and how much of your personal assets are at risk. You should choose a business structure that gives you the right balance of legal protections and benefits.
LLC - Limited Liability Company
The LLC is one of the most popular types of business entities. It’s ideally suited for smaller organizations and startups, for several reasons:
Most popular
Obligations / Benefits ( summary)
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LLCs provide their owners with limited liability protection. This means the business assets are owned separately by the LLC, not by the owners. Any liability the business has (e.g. monies owed, equipment, depreciation, lawsuits, etc.) are purely the liability of the business, and do not (generally) have any impact on the individual owner’s personal assets.
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LLCs are easier to setup and manage / change or add members.
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S-Corp ( small corporation ) elegibility can be added to lower taxation.
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Payroll tax on salaries paid to employees (but not to members or owners — they will pay self-employment tax on their personal tax returns).
c corp - The C Corporation
A C Corp, also known as a C Corporation, is a type of business entity that is formed and regulated on a state level. It is created by filing “Articles of Incorporation” with the secretary of state within the state of incorporation. It is the most formal type of company and a corporate structure. The policies and cost of creating a C Corp vary from state to state. Factors affecting whether you would want to create a C Corp include:
Stock Market
Obligations / benefits ( summary)
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A C Corporation must issue stock.
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A C Corp has limited liability, so the investors and owners of a C Corp are not generally liable for business debts and other liabilities.
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Money earned by a C Corp may be subject to “double taxation.”
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Stocks in a C Corp can be bought and sold on a public stock market if the C Corp holds an “Initial Public Offering (IPO)” where it makes it stocks available to the public.
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A C Corp can be taxed from 15% up to 38% depending on annualy income profits.
s corp - The Small Corporation
The S Corporation, or S Corp, is a business entity that was created and enacted into law by Congress in 1958. It was created to encourage small and family business creation, while eliminating the double taxation that conventional corporations (C Corps) had to pay. Key factors for S Corps include:
Corporate Tax Exempt
Obligations / benefits ( summary)
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The liability of the S Corp and the personal liability of the owners and investors are separate.
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The owners of a corporation are not personally liable for business debts, claims, or other liabilities.
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Unlike traditional C Corporations, the S Corporation does not need to pay corporate income tax. The S Corporation is a separate tax designation recognized by the IRS. Similar to the LLC, the net profit or loss generated by an S Corporation will flow through to the personal income tax returns of the shareholders and owners, and be subject to tax there.
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S Corp can be attached to the LLC as an elegibility in order to avoid double taxation and or be tax exempt, transferring the taxes to the self employed business owner with a 65% tax reduction.
non profit - Organization
A nonprofit organization is an organization that uses surplus revenues to achieve its goals rather than distributing them as profit or dividends. While not-for-profit organizations are permitted to generate surplus revenues, they must be retained by the organization for its self-preservation, expansion, or plans.
Non-profit corporations are tax exempt, paying no corporate taxes or federal tax. They're also permitted to receive funding from a wide variety of sources: grants, public donors, private donors, and corporations. Further separating non-profits from for-profit corporations, donations to non-profits are typically tax-deductible for donors as well.
Best for Churches or NGOs
Obligations / benefits ( summary)
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You're eligible to apply for state, federal, and other tax exemptions.
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Members and directors are shielded from personal liability for the nonprofit's actions.
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501(c)(3) Contributions to certain types of nonprofits are tax deductible. Ones that benefit the general public, such as charitable, educational, literary, religious, and scientific organizations.
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Civic leagues, homeowner's associations, and groups endorsing a political candidate are common types of nonprofits that don't qualify for 501(c)(3) status.