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S Corporation C Corporation LLCs DBA
Recommended For Owners wanting the liability protection of a corporation, with the simplicity of pass-through taxation of income Owners needing maximum tax and ownership flexibility, combined with liability protection Owners wanting the simplicity of pass-through income taxation and the liability protection of a corporation with fewer formalities. Great for passive income and real estate investments. Owners wanting to legally do business as a particular name without having to create an entirely new or amend an existing business entity
Ownership
  • Shareholders
  • (restrictions against corporate shareholders, nonresident aliens, and > 100 shareholders)
  • Shareholders
  • Members
  • Owners
Personal Liability
  • Shareholders typically not liable for corporate debts
  • Shareholders typically not liable for corporate debts
  • Members typically not liable for debts of LLC
  • Owners are personally liable for all debts of the business
Formalities & Record Keeping Requirements
  • Formal board and shareholder meetings and minutes
  • Annual state reports
  • Formal board and shareholder meetings and minutes
  • Annual state reports
  • Annual state reports
  • Must renew your application and publish (if required) every 4-5 years depending on state
Taxation
  • No tax at entity level
  • Income/loss passed through to shareholders
  • Taxed at entity level
  • If dividends distributed to shareholders, dividend income taxed at individual level
  • By default, no tax at the entity level if properly structured
  • Income/loss is passed through to members (as in a partnership or sole proprietorship)
  • May opt to be taxed as C or S corporation.
  • No tax at entity level
  • Income/loss passed through to shareholders
Tax Reporting
  • Income on Form 1120S
  • Salaries on Form W-2
  • Profit distribution on Schedule K-1
  • Income on Form 1120
  • Salaries on Form W-2
  • Profit distribution on Form 1099-DIV
  • Income on Form 1040, Schedule C OR Form 1065 & Schedule K-1 for profit distributions
  • Schedule C
  • If Partnership Schedule K-1
Management & Operation
  • Managed by directors, elected by shareholders
  • Day-to-day operations run by officers appointed by directors
  • Managed by directors, elected by shareholders
  • Day-to-day operations run by officers appointed by directors
  • Flexibility similar to a partnership
  • An operating agreement typically outlines management duties
  • Optional board of managers
  • Managed by owners
Formation Requirements
  • State filing
  • Subchapter S election with IRS typically required within 60 days of formation. To select, simply check one-question option on LegalZoom's questionnaire
  • State filing
  • State filing
  • State or county DBA filing required generally before using your DBA, and in some cases within 30-40 days of your first business transaction
  • Some states require a published notice in local newspaper along with proof of fulfillment
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