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Different Types of BusinessesSometimes I get questions about how people should set up their business, or if they want to start another business, what’s the best way to go about it. Should they stay with being a Limited Liability Company (LLC) or should they switch to being an S Corporation? The following chart breaks down some of the basic components as to what belongs with each entity. Single Member LLCPartnership(can be LLC)S Corp(Can be LLC)C CorpOne individual carrying on a businessTwo or more owners conducting businessOwnership is through owning shares of stock A legal association carrying on business organized under lawMinimal legal restrictionsMinimal legal restrictions Owner has complete freedom over business decisionsNo limitations on number of partners Limited to 100 shareholders No limited number of shareholdersEntitled to 100% of the profitsFlexibility in dividing up profitsShareholders who perform services are paid as employees and income is reported as a W2Shareholders who perform services are paid as W2 employees subject to payroll taxesOwner is self-employed and pays self-employment tax on net profits Partnership pays no income tax – profits pass through partners individual payment of taxS Corps generally pay no tax. Net Profit and tax liability flow through to the shareholdersNet profits are subject to tax at the corporate rates.LLC entities can be taxed as single member, partnership or even S-Corp. Determining what is the best option for your business structure is not an easy process. Both legal and tax considerations need to be considered for the best fit. Please feel free to contact me to help you determine what type of entity you need. ................
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