Some of them are better than other depending on the type of business, where you will be registering and if you are working alone or with a partner. Below we look at the different types of entity you can create and the advantages and disadvantages of each.
This is one of the most common of the different types of corporate entities. It is widely used by those companies that are in the process of issuing huge amounts of stock either through a public private placement or a public forum. There is no limit on the amount of stock holders this type of company is allowed to have. It’s a legal person in the eyes of the law and therefore the personal liability of its members is limited to the amount that is outstanding on their stock or shares.
· It has limited liability
· Unlimited life
· Tax free benefits
· Free transferability of ownership
· Easy to raise more capital
· More expensive to form
· More legal formality
· More federal and state regulations
S-corporation is a regular company that usually files IRS form 2553 with the IRS to elect a special tax status. This serves to allow an S- corporation to be a pass through entity meaning the loss or income of the S-corporation is reflected in the personal income tax return of the owners. This type of corporation is a separate legal entity and its members have limited liability as well.
Differences between closed corporation and General Corporation
· In most states, C- corporations are limited to between 30 to 50 stockholders while General corporations have no limit on membership.
· Moreover, shares of C Corporation are not freely transferable as are stocks of General Corporation.
Limited liability Company
This type of corporation has limited liability for its owners. It faces fewer restriction on membership that an S-corporation and has the option to choose how it wishes to be taxes, either as a pass trough status or as an entity.
· Limited liability
· No ownership restriction of S corporations
· Profit or loss can pass through to the personal income tax returns of the proprietors.
· They have a limited life of not more than 30 years
How To Setup An LLC
S-Corp or LLC – Which Is Better