When
forming a legal entity, it's best that it be created separate
from the holdings of its owners to ensure limited liability.
Historically, the choice has been for owners to form a corporation.
Today, however, there may be better choices: C-corporations,
S-corporations, Limited Partnerships and Limited Liability
Companies (LLC's).
Choosing
the proper entity when establishing a business is a critical
decision. The following chart should help you determine what
type of entity best suits your needs.
| |
C-Corporation |
S-Corporation |
Limited
Partnership |
Limited
Liability Company |
Management |
Centralized
management, only a few people in control. |
Centralized
management, only a few people in control. |
General
partner manages. Limited partners have little involvement. |
Either
managed by a Manager or by the Members as provided for
in the entity's charter. |
Continuity |
Perpetual
Existence |
Perpetual
Existence |
Has
a fixed existence. |
Usually
perpetual existence. |
Transferability
of Interests |
Interests
are freely transferred unless restricted by Shareholders'
Agreement. |
Interests
are freely transferred unless restricted by Shareholders'
Agreement. |
Interests
of partners cannot be transferred with consent of other
partners. |
Interests
of members cannot be transferred with consent of other
members. |
Limited
Liability |
Shareholders
are protected from personal liability. |
Shareholders
are protected from personal liability. |
Limited
partners enjoy protection from personal liability, general
partners do not. |
All
members are shielded from personal liability. |
Taxation |
Income
and loss remains with the corporation. Corporation pays
the tax. Dividends are taxable to the shareholders,
thus creating "double taxation." |
Income
and loss pass through to the members to be reported
on their tax returns. No tax is paid by the entity. |
Income
and loss pass through to the partners to be reported
on their tax returns. No tax is paid by the entity. |
Income
and loss pass through to the members to be reported
on their tax returns. No tax is paid by the entity. |
Entity
owned by |
Shareholders |
Shareholders |
Partners |
Members |
Minimum
# of persons needed to establish |
1 |
1 |
2 |
1 |
Depending
on the nature of the business and the number of people who
wish to be involved, each entity offers specific advantages
and disadvantages. Some may value alienability of assets more
highly than others, whereas someone else's main concern is
to limit tax liability. While this chart may provide useful
information in helping you determine which entity may be best
for you, it should not be viewed as legal advice. Based on
the current tax and business laws, you should seek the advice
of a tax attorney to help you decide which entity will help
you achieve your individual goals.
For
those individuals who seek to form an entity or do business
in the State of Florida or who are residents in the State
of Florida, we can help you.
With
our Tax Advisory Service, we can conduct a evaluation of your
current tax situation and make some recommendations. If we
find an area of concern, you can rest assured that by engaging
our services, our office will act as your advocate and seek
to resolve your IRS problems.
For
prompt evaluation of your case, we encourage you to click
here to register for our Tax Advisory Service. You
may also contact us using our toll-free number at 866.494.6829.
