COMPARE THE UNITED STATES OF COMPANY TYPES
Limited liability company (LLC)
Formation
- State Filing required
Liability
- Typically, members not personally liable for the debts of the LLC
Raising Capital
- Potential to sell interests, contingent upon operating Agreement restrictions
Taxation
- Not taxed at entity level if probably structured. Profit/loss passed through directly to the members
Formalities
- Less formal meetings and minutes are required state reporting required
Management
- Members have an operating agreement that outlines management responsibilities
Existence
- Perpetual unless otherwise specified
Transferability
- Contingent upon operating agreement restrictions
General Corporation
Formation
- State Filing required
Liability
- Typically, shareholders not personally liable for the debts of the corporation
Raising Capital
- Shares of stock are usually sold to raise capital
Taxation
- Taxed at the entity level and shareholders receiving dividends are taxed at the individual level
Formalities
- Board of Directors, formal meetings, minutes and annual state reports required
Management
- Shareholders elect board of Directors to appoint officers for day-to-day management
Existence
- Perpetual unless otherwise specified
Transferability
- Shares of stock are easily transferred
S-Corporation
Formation
- State filing requires within 75 days of formation, IRS filing of Subchapter S election is required
Liability
- Typically, shareholders are not personally liable for the debts of the corporation
Raising Capital
- Shares of stock are usually sold to raise capital
Taxation
- Not taxed at the entity level, Shareholders are taxed at the individual level of profit/loss
Formalities
- Board of Directors, formal meetings, minutes and annual state reports required
Management
- Shareholders elect board of Directors to appoint officers for day-to-day management
Existence
- Perpetual unless otherwise specified
Transferability
- Shares of stock are easily transferred after observing all IRS regulations and ownership requirements
C-Corporation
Formation
- State filing requires within 75 days of formation. Form 2553 required to be filed with the IRS
Liability
- Typically, shareholders are not personally liable for the debts of the corporation
Raising Capital
- Shares of stock are usually sold to raise capital. Venture capitalists and angel investors are typically a good source of funding
Taxation
- Fringe benefits and owners’ salaries can be deducted as business expenses, Shareholders may face double taxation
Formalities
- Board of Directors, formal meetings, minutes and annual state reports required
Management
- Shareholders elect board of Directors to appoint officers for day-to-day management
Existence
- Perpetual unless otherwise specified
Transferability
- Restrictions on transferring shares of stock