C-corporation

The most common corporate entity type is the "C" Corporation or General Corporation. This entity is widely used by companies planning to issue large quantities of stock in either a private or public forum as there is no limit to the number of stockholders the company is allowed to have. Because a corporation is a separate legal entity under the law, their personal liability of shareholders is limited to the amount they have invested in the company. The C-Corporation pays taxes on the income it receives. This means that after payroll and other deductions, the C Corporation pays corporate taxes on all profits accumulated throughout its fiscal year. The benefit of this is, the income is taxed at a lower rate than that imposed on a sole proprietor or self-employed person. Also, the C-Corporation has its own tax life, meaning; it has the ability to continue on forever and its stock passed on to others with ease. C-Corporations can also cover items such as pension and medical plans for its employees as well as college assistance programs and other insurance premium deductibles with pre-tax dollars.

S-corporation

S-corporation is a regular Corporation that files IRS form 2553 to elect a special tax status with the IRS. This allows the S-Corporation to become a "pass through" entity-meaning that the income or loss generated by the business is reflected on the personal income tax return of the owners. The articles of incorporation filed with the state are the same as those filed on a C-Corporation. An S-Corporation is also considered a separate legal entity by the state and offers the same amount of protection for its shareholders in regards to debts and liabilities of the business. Just as a C-Corporation, the S-Corporation must keep up to date on the appropriate forms and compliance required by corporations, namely meeting minutes, by-laws and proper bookkeeping. The S-Corporation is restricted to no more than 100 shareholders and none of the owners must be U.S. citizens or U.S. legal residents. Moreover, S-Corporations cannot be owned by C-Corporations, other S-Corporations, many trusts, LLC's or Partnerships.  The election is made by filing form 2553.  If the election is made within 75 days of the incorporation date, the election will be effective for the next calendar year.

Limited liability Company

As its name implies, the Limited Liability Company provides limited liability for its members and owners, similar to how a Limited Partnership provides for its Limited Partners or a corporation provides for its shareholders. The difference is found in the LLC's members’ ability to manage or control direction of the company, a privilege not enjoyed by the Limited Partner. The LLC can choose to either choose how it wishes to be taxed as a "pass through status" like that of an S-Corporation or as an entity which pays its own taxes. The LLC has fewer restrictions on membership than an S-Corporation. This relatively new form of entity is available in all fifty states while it is still finding its own in the governing laws of the individual states.