The Alphabet Soup of Business Formations: LLC, C-Corp, S-Corp, INCs
It's exciting to build a business. But before you start dishing out money for licenses and registrations give yourself time to define who you are as an entity and get educated on the alphabet soup of LLCs, C Corps, S Corps, and Incs. Here are some general definitions to start with:
A limited liability company (LLC) is a flexible form of enterprise that blends elements of partnership and corporate structures. An LLC is not a corporation; it is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions.
C corporation refers to any corporation that, under United States federal income tax law, is taxed separately from its owners. A C corporation is distinguished from an S corporation, which generally is not taxed separately. A C corporation does not cease to exist when its owners or shareholders change.
An S corporation (sometimes referred to as an S Corp) is a special type of corporation created through an IRS tax election. An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S corporation. The S is referred to a section in IRS Code.
An incorporated business (also called a corporation) is a type of business that offers many benefits over being a sole proprietor or partnership, including liability protection and additional tax deductions. Forming a corporation also allows you raise capital through sale of shares of your company.
Each formation has its pros and cons and should be chosen based on the state of your business along with goals you wish to obtain. They are also formed differently based on the location of your business. To maximize benefits continue to gain information on each while speaking with those familar within the field including lawyers and accountants. Then choose which best suits you.
Remember it is important to claim your business legally but without a business you will waste time and money. For a bit of motivation, the guys at Google received a hefty check from an investor and couldn't cash it at the moment because they weren't documented on paper. I say this to say, registering your company doesn't make you a company; its a well defined idea.
Create with me or let me know what you want to see next. Email firstname.lastname@example.org or call 678-760-9595.
Definitions from Google search online.