Corporate Comparison Chart

Topic	S Corporation	C Corporation	LLC
Qualifications	• No more than 100 shareholders • Owners must be US citizens or green card holders or have filed personal US tax returns for the last 2 years • No more than 25% passive income (income from rents/investments) • Can only have one class of stock (can still have voting and non voting stock)	• No restrictions – can be owned by individuals, corporations or foreigners	• No restrictions – can be owned by individuals, corporations or foreigners
Liability	• Limited to amount invested	• Limited to amount invested	• Limited to amount invested
Federal Tax Treatment	• Pass through entity • Taxed once on shareholders • No corporate level taxation • Still file corp tax return	• Double taxation • Corp pays taxes • Shareholders pay taxes on dividends	• Pass through entity • Members pay taxes • No LLC tax return
Self Employment Tax	• Minimized by paying reasonable salary and taking dividends	• None (but double tax, see above)	• Assessed on 100% of the profits if a single member LLC
Share of Profits & Losses	• Shareholders receive percentage of profits & losses based on percentage of shares owned	• Shareholders receive percentage of profits & losses based on percentage of shares owned	• Share of profits & losses can be initially set by operating agreement and later by other agreement
Record keeping	• Board annual minutes • Shareholder annual minutes • Annual report (fee typically $100) • Board Resolutions	• Board annual minutes • Shareholder annual minutes • Annual report (fee typically $100) • Board Resolutions	• Board and Member annual minutes not required but recommended • Annual report (fee typically $250) • Member Resolutions
Advantages	• Cheaper to set up than LLC • Cheaper annual report fee • Better tax treatment than C Corp • More established law (less uncertainties than LLC)	• Easier to go public • Cheaper to set up than LLC • Cheaper annual report fee • More established law (less uncertainties than LLC)	• Flexibility of profit distributions • Harder for personal creditors to get ownership interests • Good for foreign citizen • No limit on passive income • Taxed as partnership if 2+ owners (not married)
Disadvantages	• Limit on passive income • Must do annual minutes • Must file corp tax return • Must qualify	• Less flexible • Higher taxes • Must do annual minutes • Must file corp tax return	• Higher filing fee • Higher annual report fee • Higher late penalties • No tax benefits for single owners • Possible less liability benefits for single owners • Less established laws (more uncertainty)
Recommended	• If you qualify then this is typ- ically the best bet • Best tax and liability protection • A little more paperwork but the tax savings are usually worth it	• If you plan to go public • Try to avoid the double taxation if you can	• If holding real estate or long term investments • If varying income distributions from year to year • More flexibility but most owners don’t take advantage of this
Items Needed or Recommended	• Indemnification Agreement • Shareholder Agreement • EIN • Business Registration • New Hire Reporting Forms • Unemployment Report • County Recording • Corporate Counsel	• Indemnification Agreement • Shareholder Agreement • EIN • County Recording • Corporate Counsel	• Indemnification Agreement • Operating Agreement • EIN • County Recording • Corporate Counsel