A company can be defined as an entity that engages in business; it can be a proprietorship, partnership or a corporation. When starting a company is important to first decide on its structure (Chapter 01, 2012). Different structures have different purposes and benefits as well as drawbacks. This research strives to compare different types of corporations and their advantages.
S corporation have a major advantage in the sense that they are granted with tax exemption ( Chapter 30, 2012). Typically they are small business corporations and they fall under the Subchapter S of the chapter 1 of the internal revenue code (IRC). To qualify as an S corporation the entity must have less than 100 shareholders. Additionally, should have some of its shareholders as non-resident alien and have more than one class of stock. the main purposes of the S corporations is to allow relatively small, closely held business that would otherwise be organized as partnership or limited to partnerships to take advantage of the corporate form of business organization without being subjected to double taxation or to the formalities of corporate governance (Chapter 2012).
Delegate your assignment to our experts and they will do the rest.
The C Corporation is subject to taxation that does not elect S corporation status. This type of corporation is much larger and is publicly traded corporation with unlimited numbers of both domestic and foreign origin. On the contrary, the Limited liabilities Company is a type of corporation that is considered as a pass through entity- its profits and losses are forwarded directly to the owners (Smith, 2017).
The LLC is similar to the S corporations in a number of ways. For instance, in both businesses the owners are typically not personally responsible for business debts and liabilities (Van Werkum, & Troy, 2015). Both businesses occur as separate legal entities created by a state filing. While S corporations must file a business tax return, the LLC only file business tax returns if the LCC has more than one owner. They have pass though taxation meaning no income tax are paid a business level.
The major differences between LLC and S corporations is that LLC can have unlimited number of members while the S corporation can have no more than 100 shareholders. For LCC it is possible to have non-US residents/citizens as its members while in S corporations it not allowed to have non-resident alien members (Chapter 03, 2012). According to law, S corporations may not be owned by C corporations or other S corporations, LLCs and trusts. They are meant to benefit people in small business. The LLC on the other hand has an advantage in that they can have any subsidiaries.
If I was operating my own business I would choose those the LLC structure for various reasons. Firstly with this kind of structure is possible to choose on having members or managers to handle the operations. Having managers will make the business to work like a partnership (Taulli, 2016). The LCC comes with an additional advantage in that its operations can be handled more smoothly. They are easy and some of these operations can be handled online.
The LLC is a pass through entity the profits go directly the owners. If it is a single-member business the process of preparing tax returns will be more simplified (Taulli, 2016). The only thing that the owner need to do is to file a schedule SE for self-employment taxes and Schedule C detailing the revenues and the deduction. In case of litigation or bankruptcy the owner is protected be the limited liability provision. With this type of corporation it is possible to get liability protection. The business can also be placed under a living trust.
References
Chapter 01 (2012). The foundations of law and ethics. BUS670
Chapter 02. (2012). Beginning a civil lawsuit. BUS670.
Chapter 03 (2012). Completing the civil lawsuit and alternative dispute resolution. BUS670.
Chapter 28. (2012). Sole proprietorships and partnerships.BUS670
Chapter 30. (2012). Corporations. BUS670
Smith, M. G. (2017). Corporations and society . Transaction Publishers.
Taulli, T., (2016). When to for an LLC (Limited liability company). Forbes.
van Werkum, C., & Troy, G. (2015). Limited partnerships: Changes ahead. Superfunds Magazine , (400), 34.
