Three Types of Corporations; C Corporation, S Corporation and LLC!

There are basically three types of corporations in the business world; C corporation, S corporation and LLC. All businesses have to first become a C corporation before eventually choosing its final metamorphosis. Let us begin the discussion with S Corporation. The S corporation is a corporation that eliminates any chance of having double taxes on the running of the business.



In the S corporation, all its profits are taxed to the shareholders of the business and to the business owners, with no additional federal corporate taxes. One just has to pay an annual tax return through the form 1120S. The income, profits, expenses and losses of the S corporation are all disclosed in this form.

Shareholders of the S corporation are issued separate forms called the Form K-1. In this form, the income that the shareholders received through the corporation and its tax returns are reported. Employees of an S corporation are also taxed with their taxes getting filed with the company.

It is necessary for the S corporation to file their tax returns, with deadlines being met punctually. If the deadline is not met for some reason or the other, the business is offered an extra six months’ time to file taxes. If once again there is another delay, the business is offered the choice of selecting S corporation status for the following year. For a business to elect for S corporation status, its shareholders, both present and prospective have to give consent. Without any consent, the election of S corporation is considered invalid.



On the other hand, LLC is basically the acronym for Limited Liability Company, or Limited Liability Corporation, which has much compensation on tax advantages. While corporations offer attractive limits on personal liability and partnerships offer better tax advantages, the limited liability company works on a combination of these features. In the process, the LLC basically offers protection against any personal liability with a lot of tax advantages.

An LLC is preferred over an S or C corporation not only for these points, but also because they are more flexible than the corporations. In addition to this, all legalities that are connected to the running of the LLC are less formal. This in turn leads to a LLC having a tax advantage.

In terms of federal taxation laws, the LLC exercises flexibility in accessing tax advantages. With more than a partner in the firm, the firm is considered a partnership while multiple owner LLCs are treated as either an S or C corporation. And single owner LLCs are considered either as a sole proprietorship or as a C or S corporation. The main tax advantages of an LLC are owing to the fact that it is able to avoid double taxation and that its dividends are not taxed. In an LLC, its income is forfeited on initial taxation and only each member is taxed on individual allocations. However, some LLCs tend to have franchise taxes on them or may have some annual fees to be paid.

4 thoughts on “Three Types of Corporations; C Corporation, S Corporation and LLC!”

  1. Depends on what is your small website biz. If you mean a part time start up website business, then you may not consider the cost of incorporation until you know that the website biz is going to fly. Risks on the other hand are liability and that is something that you may have to weight out. Are you using a trade name that might reference a corporate name say like Google or one of their brand names say like adsense in your web site name? Are you soliciting aggressive comments that may offend larger corporations to take legal actions. LLC Incorporated Trade Marks is another area that one has to be aware of. Incorporating LLC maybe a weighing out factor of weighing the benefits against your costs. If you want to consult a lawyer in the USA you can check this site at lawyerslawfirms.com

  2. I agree with admin. It depends on what type of website you want to start.

    But most often it’s not worth paying for incorporation until you have had some success with your website (as you might know, most websites fail to make any money).

  3. In terms of federal taxation laws, the LLC exercises flexibility in accessing tax advantages. With more than a partner in the firm, the firm is considered a partnership

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