Business Formation Type
Are you considering forming a new business entity and are unsure as to what type of entity to create? The following chart summarizes the basics of each entity type, its benefits and limitations.
| Benefits/Limitations | C Corporation | Sub-chapter S Corporation |
Limited Liability Company | General Partnership | Sole Proprietor |
| Owners have limited liability for business debts and obligations | X | X | X | ||
| Created by a state-level registration that usually protects the company name | X | X | X | ||
| Business duration can be perpetual | X | X | X | ||
| May have an unlimited number of owners | X | X | X | ||
| Owner need not be U.S. citizens or residents | X | X | X | X | |
| May be owned by another business, rather then individuals | X | X | |||
| May issue shares of stock that attract investors | X | X | |||
| Owners can report business profit and loss on their personal tax returns | X | X | X | X | |
| Owners can split profit and loss with the business for a lower overall tax rate | X | ||||
| Permitted to distribute allocations, under certain guidelines | X | X | |||
| Not required to hold annual meetings or record meeting minutes | X | X |
This was presented at Rainmaker BNI on Tuesday, June 14th, 2011 by Wendi D. Coley, CPA of Coley Accountancy. I felt that this was extremely relevant to my audience and I wanted to pass it on. Please check out Wendi’s web site at www.ColeyAccountancy.com.
Follow Us !