LLC vs. Corporation vs. S-Corp

By : Raad Ahmed

April 2015

C-CORP, S-CORP, LLCA JOURNEY THROUGH INCORPORATION

BROUGHT TO YOU BY

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SO YOU HAVE A TEAM OF FOUNDERS

AND YOU’RE BUILDING SOMETHING GREAT

BUT NOW IT’S TIME TO START SELLING IT…

TIME TO INCORPORATE!

IT’S QUITE SIMPLE…

STEP 1: CHOOSE A LEGAL STRUCTUREMeaning setup an entity that will conduct business with other entities

THERE ARE 3 POPULAR CHOICES

S-CORPORATIONA standard corporation with a special tax status,

limited number of shareholders and limited liability for the owners

That sounds promising…

C-CORPORATIONA standard corporation with unlimited number of shareholders and

limited liability for the owners

KEY DIFFERENCES

S-CORPORATION C-CORPORATION

TAX PASS-THROUGH TAXES PAID BY THE C-CORPOWNERS PAY TAXES FOR THE S-CORP C-CORP PAYS TAXES FOR ITSELF

LIMITED NO. OF SHAREHOLDERS UNLIMITED SHAREHOLDERSS-CORP IS LIMITED TO 100 SHAREHOLDERS

SINGLE CLASS OF STOCK MULTIPLE STOCK CLASSESS-CORP CAN ISSUE ONLY 1 CLASS OF STOCK C-CORP CAN ISSUE UNLIMITED NO. OF CLASSES

NO STOCK OPTIONS FLEXIBLE STOCK OPTIONSS-CORPS CAN’T GIVE OUT STOCK OPTIONS C-CORPS HAVE FREEDOM IN ISSUING

EMPLOYEE STOCK OPTIONS

C-CORP IS THE MOST POPULAR CHOICE AMONG STARTUPS

LIMITED LIABILITY COMPANYA company with limited liability of it’s owners and simple accounting

schemes, but also with limited privileges in civil procedures

LLC is usually avoided by investors and the

majority of startups

SO WHICH STRUCTURE IS BEST FOR ME?

THERE IS NO DEFINITIVE ANSWER BUT THIS MIGHT HELP…

STEP 2: SEEK HELP FROM A LAWYERIt’s possible to do it yourself, but it’s a smart choice to include a lawyer in the process

VISIT

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