This is the classical form of a corporation. It has shareholders, a board of directors, and officers. It has its own fully-fledged annual income tax return. Some of the advantages of a C-Corporation are its potential for complex structures that can accommodate investors and an array of different roles and authority levels, its ability to maintain long-term financial independence from its owners, and its ability to help its owners maintain tax compliance. Some of the disadvantages of a C-Corporation are increased accounting labor/expense, a requirement to pay owner-operators a reasonable salary, and a potential for corporate income tax.
This is a variant form of a corporation reserved for use by small businesses. It has all the same structures as a C-Corporation, but it files a simplified annual tax return and any profits “pass-through” automatically to its owners’ personal income tax return. This can present tax savings for the owners, and help simplify the corporation’s tax filings, but also reduces the corporation’s ability to insulate the owners’ finances from those of the business.
Limited Liability Companies offer a simpler structure, with owners called “members” and none of the tiered power structures of a corporation. If an LLC has more than one owner, it is naturally a multi-member LLC. The owner-operators of an LLC are not required to be paid a reasonable salary with withholding, which means more flexibility in getting money out of the business, but the need for the owners to manage estimated tax payments instead. The default tax treatment for an MMLLC is partnership taxation, however the entity can instead elect to be taxed as either a C-corporation or an S-corporation.
If an LLC has just one member, it is a single-member LLC, the simplest of all business structures that offer liability protection. The default tax treatment for an SMLLC is as a “disregarded entity” meaning that it can file on a Schedule C of its owner’s personal income tax return. This structure generally suits a very small and very simple business quite well and allows all profit or losses to easily pass through to its owner’s personal return.