Entity Formation

Are you interested in starting your own business and are considering forming a corporation or LLC to protect your assets, minimize liabilities, and most importantly, lower your taxes? There are many different types of entities, but which one is right for you? Is an S-Corp better than an LLC, is an LLC better than an S-Corp, or should you be an LLC taxed as a corporation? There are so many options.

ACap Advisors & Advisors, LLC will work with you to identify what type of entity is right for you and prepare all the necessary paperwork and filings to ensure your corporation or LLC is organized properly and is compliant. We take care of all the steps so that you can focus on growing your business.

If you’re wondering what is the difference among the various entity types, below is a brief description of each one and their pros/cons.

S-Corporation

An S-Corporation is mostly for small businesses because it provides the benefits of the corporation without the double taxation of a C-Corporation.

Pros

Cons
  • Pass-through entity, meaning the corporation does not pay federal tax.
  • Minimize payroll taxes by paying a reasonable salary and taking the rest as profits.
  • Liability protection.
  • No limit on annual revenues.
  • Limited to number of and kind of shareholders.
  • Can only have one class of stock.
  • Running a corporation requires regular maintenance such as keeping minutes, books, and regulatory filings.

C-Corporation

A C-Corporation is the most common type of corporation for large companies because of the benefits listed below.
Pros Cons
  • You can have as many shareholders as you want.
  • You can structure your shares with different voting rights.
  • There is no restriction on the type of shareholders.
  • C-Corporations are doubled taxed.
  • Cannot pay an unreasonable salary to avoid paying a dividend.
  • Running a corporation requires regular maintenance such as keeping minutes, books, and regulatory filings.

LLC (Limited Liability Company)

An LLC is commonly used by real estate investors, consultants, and those just starting out wanting liability protection, but without all the annual reporting requirements.
Pros Cons
  • Can be very flexible. 
  • Liability protection.
  • Great for partnerships where the partners make unequal initial contributions to start the business.
  • Tax reporting/filing gets complicated if there is more than one member of an LLC.
  • Some states, like California, impose an LLC fee which is in addition to any annual franchise tax.
  • Similar to a corporation, an LLC must maintain separate books and records, which adds additional costs.

Contact ACap to schedule a free consultation to evaluate how we can help you best structure your business at (818) 272-8511 or by emailing info@acapam.com