Choosing a Business Entity

Form an LLC
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S Corp

C Corp

Are you protected from Liability? No No;  all partners are jointly liable for actions of others. Yes Yes Yes
Number of Owners 1  2 or more No more than 75 Unlimited  Unlimited-one person LLC allowed in most states
Taxation on Income Personal tax Profits flow to partners who pay personal tax Profits flow through to owners, who pay personal tax on it. The corp. must pay taxes on its profits, and the owners on distributions to them by the corporation. LLC profits flow to members who pay personal tax.  Disadvantage: self employment taxes.
Can Owners Deduct losses form their personal tax payments Yes Yes Yes No Yes
 Do you have to  do payroll paperwork? Yes Yes No No Yes
Can you decide how much income or expenses to allocate among owners regardless of the capital each owner invests in the business entity? Not applicable Yes No No Yes
Advantages -


easy set up and understand can allocate income and expenses as agreed among partners No Social Security or Medicare taxes 100% deductible health insurance, fully deductible medical reimbursement and fringe benefits plans,   up to $50,000 profits are taxed at 15% if left in the corporation rather than at your  higher, personal income tax rate.  Limited Liability as in a  corporation with pass through income benefits of a partnership. 
Disadvantages -


 Personal liability,  self-employment tax Liable for actions of other partners.  Self-employment tax. no health insurance deduction and limited deductions for home office cannot use corp. expenses to offset your personal income. if corp. has a lot of profits, doublet taxation occurs Self employment tax, unsettled, and insufficient law issues as to the legal and tax treatment of this entity.

Copyright 2008 []. All rights reserved.
Revised: 01/28/20.


Copyright 2008 []. All rights reserved.
Revised: .