Our firm advises and represents companies and entrepreneurs with a broad range of business related services. We advise our clients on business law, start-up assistance relating to the formation of an entity, the protection of a trademark or license agreement and assist with buying or selling a business.
There are two main types of corporate business structures, those being a ‘corporation’ and the other being a ‘limited liability company.’ Corporations can be sub-typed into ‘C’ and ‘S’ Corporations which have various tax advantages and drawbacks. For the most part ‘C’ and ‘S’ Corporations are similar in that they offer limited liability protection to their shareholders up to the amount of the shareholders’ respective contributions into the corporation.
Typically, ‘C’ Corporations are large publically traded companies with numerous shareholders. Profits of a ‘C’ Corporation are taxed twice. The corporation pays income tax on the profits it generates, and its shareholders pay income tax on any distribution payments they receive from the corporation.
‘S’ Corporations on the other hand are usually small privately held companies with no more than 75 shareholders each of whom must have a valid Social Security Number issued by the United States. The benefit of an ‘S’ Corporation is that profits are taxed only when distributions are issued to shareholder members.
Limited Liability Companies (“LLC”) are similar to corporations in that an LLC provides limited liability protection to its member owners. In other words, members are only liable for the debts of the LLC up to their respective contributions, with no personal liability whatsoever. As with an ‘S’ Corporation, there is no double taxation in that profits are taxed only when they are distributed to its members. Unlike an ‘S’ Corporation, members need not have a Social Security Number.
Entrepreneurs considering a partnership may want to consider what is called a Limited Liability Partnership (“LLP”). An LLP is similar to an LLC is that it provides limited liability protection for the partnership. Two critical differences between an LLP and an LLC is that an LLC can have one member, but an LLP requires at least two partners. Additionally, an LLP provides liability protection to you for your partner’s misconduct or negligence. Like an LLC, partners need not have a Social Security number and profits are taxed only when a distribution is made to the partners.
If you are looking to form a partnership, corporation or LLC, please call attorney James D. DiPasquale for Free Consultation