Incorporate – Business Entities – The S-Corporation
Apr 17th, 2007 by Shaun Carter
When incorporating, you have several business entities to choose from. There is the C Corp, S Corp, and LLC (limited liability company). I will not discuss the DBA (doing business as) as an option because this form of entity provides NO legal protection or shelter whatsoever and the owner is personally liable for everything.
The S-Corporation:
The S-Corp is an optional election a C-Corp may make upon incorporation that changes the rules under which it must operate when dealing with the Internal Revenue Service. When the filing is completed with the IRS, the S-Corp is now taxes as if it were a sole proprietorship or partnership by passing any income or loss through to the shareholder’s individual income taxes. An S-Corporation can fairly easily revert back to C-Corporation status.
PROS: Prestige of the corporation without the double taxation. Ideal for “1 person corporations”.
CONS: More expensive to setup than a DBA; more paperwork and formality required than an LLC (holding Shareholder/Board meetings, keeping minutes and resolutions).
The Lowdown: Though taxed in a similar manner to LLC’s, still requires the corporate formalities of a regular corporation (holding Board meetings, keeping minutes and resolutions).
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