Types Of Corporations

C-Corporation

• The C-Corporation which is a regular (or standard) corporation.
• A disadvantage of a C-Corporation is that it has to pay corporate taxes on corporate profits and when it distributes profits to its stockholders, the stockholders have to pay income tax on those dividends. The formation of a LLC or an S-Corporation will eliminate double taxation.

S-Corporation

• An S-Corporation is granted a special tax status under the Internal Revenue Code (IRC). The ‘S’ stands for small business corporation.
• An S-Corporation has limited liability of a Corporation but taxes are pass through to the individual shareholders based on their proportional share ownership. That means, shareholders will be taxed based on how much shares they own in the company and not how much payout they have received.
• An S-Corporation has a limit on the number of shareholders who must be US residents.
• To qualify as an S-Corporation, your Corporation must be filed at the state level and the Corporation must not have more than 75 shareholders. All the shareholders must be a U.S. citizen or a Permanent Resident Alien with a Green Card. The Corporation can only have one class of stock.

Professional Corporation

• A professional corporation is a type of corporation which provides a service that requires a license.
• Licensed practitioners like engineers, lawyers, chiropractors, accountants, architects or doctors are required to form professional corporations.

Limited Liability Company (LLC)

• A LLC is an in-between of a corporation and a partnership.
• A LLC member can be an individual or a separate entity (e.g. a corporation or a partnership) that has a share in the LLC.
• As similar to a corporation, a LLC protects its members from personal liability for business debts and court rulings against the LLC. Only the money invested into the corporation will be at risk.
• As similar to a partnership, a LLC is formed by the filing of a certificate of formation with the Secretary of State and will be taxed like a partnership.
• Like a partnership, the members of LLCs have to create an operating agreement to state how the LLC business will be managed.
• A LLC does not restrict its owners to be US residents.
• A LLC can have more flexibility in its management style because it is controlled by the members and not by the state’s Business Corporation Act.
• A LLC is taxed as a partnership (where any income and deductions of the LLC is passed through to the members as their personal returns) unless it has been elected as a corporation.

Non-Profit

• A non-profit corporation is granted tax-exempt status under the IRC.
• Such a corporation need not pay any taxes on its income. Any person or organization who donates to a non-profit corporation can get a tax deduction for the contribution made.