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Limited Liability Company
A limited liability company (LLC) lets you take advantage of the sole proprietorship, corporation, and partnership business structures. LLCs are flexible business structures. Your LLC separates business and personal liabilities. All owners have shared tax responsibilities.
This type of legal entity offers its owners limited liability C-corps are taxed separately from its owners and the tax liability is according to their net profit, they are based on a progressive rate schedule. It has more flexibility in terms of the number of ownership since it can have unlimited numbers of shareholders. Dividends paid to the owners of the corporation are taxed on their personal return, however most dividends are taxed as a long term capital gain which is a lower rate. C-Corps owners are allowed to deduct fringe benefits as a business expense.
This type of legal entity is structured as a C-corporation but it has some restrictions and differences from it. Shareholders have to apply for the election of S-Corporation status to The Internal Revenue Service. Election to do business as an S corporation allows the shareholder have unlimited liability while being taxed as a partnership. This means that an S corporation will not have pay federal corporate tax, it is a pass-through tax entity in which all the net profit or loss is reported in the shareholders personal returns according to their share on the corporation; that way income could be offset by any other loss. However, failure to make the election according to the parameters stated by the IRS could result on the entity being taxed as a C-corporation.