|
"C" and "S" Corporations versus LLC:
An LLC ("Limited Liability Company") provides
protection against individual liability and is treated
like a partnership for federal income tax purposes.
Tax losses and profits pass through to its members
and the entity is not taxed separately. An LLC can
adopt a more informal process for running the company
than a "C" corporation and an "S" corporation.
A "C" corporation is a separate entity from its
shareholders for tax purposes. This means that both
the corporation and the shareholders are taxed.
It has more administrative formalities than the LLC..
An "S" corporation is a corporation that meets
certain requirements( e.g., no more than 100
shareholders who are not nonresidents) which permit
it to elect to be subject to the provisions of
Subchapter S of the Internal Revenue Code. Thus an
"S" Corporation also provides pass-through of gains
and losses to its owners. The S corporation still
maintains formalities of a "C" corporation and strict
compliance is necessary. Unlike an LLC, an S
corporation must allocate income and loss among its
shareholders on a pro rata basis. There are no
limitations on an LLC with regard to having other
entities as members. Not all corporations can elect
"S" corporation status.
| 
