Compare Business Entity Types
Protection
Description of Limited Liability
LLC
By offering personal asset protection, LLCs prevent you from being held personally responsible for business debts.
Corporation
By offering personal asset protection, C-Corporations prevent you from being held personally responsible for business debts.
S-Corporation
By offering personal asset protection, S-Corporations prevent you from being held personally responsible for business debts.
Non-Profit
By offering personal asset protection, Nonprofitsprevent you from being held personally responsible for business debts.
Managing your business
Description of flexibility in management
LLC
LLCs must be managed by members or managers in accordance with the operating agreement’s provisions.
Corporation
C Corps must have directors who are elected by the shareholders to oversee and choose the officers in charge of running the business on a daily basis.
S-Corporation
S Corps must have shareholders-elected directors who supervise and choose officers to manage the business’s daily activities.
Non-Profit
The board of directors of nonprofit organizations oversees operations in accordance with the rules outlined in their bylaws.
Description of ease of ownership changes
LLC
The operating agreement’s provisions govern any changes in an LLC’s ownership.
Corporation
A C Corp can readily change ownership by selling stock to new or existing shareholders.
S-Corporation
Selling shares to new or existing shareholders is an easy way to transfer ownership in a S Corp.
Non-Profit
Nonprofit organizations don’t have owners.
Description of business perpetual existence
LLC
LLCs provide personal asset protection, which shields you from being personally liable for business debts.
Corporation
C Corps provide personal asset protection, which shields you from being personally liable for business debts.
S-Corporation
S Corps provide personal asset protection, which shields you from being personally liable for business debts.
Non-Profit
Nonprofits provide personal asset protection, which shields you from being personally liable for business debts.
Description of ongoing formalities
LLC
An LLC may have to submit an annual report and/or pay franchise fees, depending on the state where it was incorporated.
Corporation
C Corps must perform a variety of ongoing formalities, including drafting bylaws, selecting directors, holding initial and annual shareholder meetings, and issuing stock.
S-Corporation
S Corps must complete a number of continuous formalities, including the creation of bylaws, the appointment of directors, the conducting of initial and annual shareholder meetings, and the issuance of shares, after they are formed.
Non-Profit
Nonprofits must complete a number of ongoing formalities such as creating bylaws, choosing directors, and applying for tax exemption after being formed.
Description of ability to raise capital
LLC
Although LLCs cannot sell shares, they may be able to raise money through bank loans and other methods.
Corporation
C Corporations are authorized to issue a variety of stocks that an infinite number of shareholders may buy.
S-Corporation
S Corps are only permitted to issue one kind of stock, and a maximum of 100 shareholders may purchase it.
Non-Profit
Nonprofits are eligible to apply for bank loans, grants, venture capital, and tax-exempt donations.
Tax
Description of pass-through taxation
LLC
Corporate taxes do not apply to LLCs. Instead, gains or losses are passed through to each member and subject to personal income tax rates.
Corporation
The C Corp.’s income is taxed twice: once at the corporate level and once at the shareholder level.
S-Corporation
S Corps are not subject to corporate taxation. Instead, gains or losses are passed through to each shareholder’s personal income taxes.
Non-Profit
If a nonprofit does not apply for and receive tax-exempt status, corporate taxes are applied to the organization’s income.
Description of double taxation
LLC
LLCs are not subject to corporation taxation.
Corporation
The C Corp.’s income is taxed twice: once at the corporate level and once at the shareholder level.
S-Corporation
S Corps are not subject to corporate taxation.
Non-Profit
If a nonprofit does not apply for and receive tax-exempt status, corporate taxes are applied to the organization’s income.
Description of tax exempt
LLC
LLCs provide personal asset protection, which shields you from being personally liable for business debts.
Corporation
C Corps provide personal asset protection, which shields you from being personally liable for business debts.
S-Corporation
S Corps provide personal asset protection, which shields you from being personally liable for business debts.
Non-Profit
Nonprofits provide personal asset protection, which shields you from being personally liable for business debts.
State filing fee
Description of state formation fees
LLC
The state requires LLCs to pay formation fees. Fees vary according to the state in which the corporation is formed.
Corporation
The state requires C Corps to pay formation fees. Fees vary according to the state in which the corporation is formed.
S-Corporation
The state requires S Corps to pay formation fees. Fees vary according to the state in which the corporation is formed.
Non-Profit
The state requires Nonprofits to pay formation fees. Fees vary according to the state in which the corporation is formed.
Description of ongoing filing fees
LLC
There may be required ongoing fees and report, depending on the state of incorporation.
Corporation
Various reports and payments, such as an annual report and franchise fees, are typically required each year depending on the state of incorporation.
S-Corporation
Various reports and payments, such as an annual report and franchise fees, are typically required each year depending on the state of incorporation.
Non-Profit
This differs for nonprofits from state to state.
Business Structures Comparison
A side by side comparison of Corporations, LLCs, and Non-Profits
Limited Liability Company
LLCs have quickly become a popular business structure due to their unique combination of asset protection ability and simplicity. The main benefits include:
- The limited liability protection afforded to business owners
- Minimal compliance requirements & flexible profit distributions
- Zero ownership restrictions
- And the same pass through taxation structure as S corporations
Some of the drawbacks of LLCs include:
- The need to pay self-employment taxes and keep detailed personal records
Nonprofit Corporation
Non-profits are a great business structure for organizations seeking to change the world. Beyond the impact you can have on your chosen mission, the main benefit of forming a non-profit is the tax-exempt status of such a corporation. Other benefits include:
- All charitable donations made to your business will be tax-deductible
- Founders and members are generally not held responsible for a nonprofit’s debts
- Non-profits also receive discounts on postage and advertising rates
However, because they exist to serve the public, non-profits are under much greater public scrutiny and are held to high standards of organization, reporting, and record keeping.
The Corporation
A C corporation is a business structure most well suited for the largest businesses. The main benefit of filing as a C Corp is the separation of owners and the business itself. There are many other advantages as a result, including:
- Reductions in personal liability for any debts accumulated by the business
- The power to raise funding by selling stocks
- Increasing the credibility of your business
- The option to transfer ownership easily
- The ability to deduct benefits such as employee health insurance
Disadvantages of this type of corporation include:
- Increased number of rules, regulations, and requirements which must be constantly upheld
- Due to the unique tax structure of a C corporation, “double taxation” may occur.
The S-Corporation
An S corporation is similar to a C corporation but for smaller businesses, such as a family owned organization. One of the main benefits of this particular structure comes again in the form of limited personal liability. However, additional benefits for many smaller businesses come in the form of different tax organization, including the following:
- Pass-through taxation, which allows you to pay taxes below the corporate level
- Salary and Dividend payment which also results in a lower tax bill as you can split the income from your corporation.
S Corps also offer other benefits, including:
- The separation of personal liability from that of the business. Your own liability will be equal only to the value of an owner’s investment.
- Simpler operating guidelines than C Corporations
- And asset protection, which shields your personal assets from litigation, business creditor claims, and contracts.
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