Choose your Business Structure
Choosing the right business structure that suits your operation is an important step. It influences the day-to-day operations, taxes you need to pay, the ability to raise funds, and your personal liability. You should carefully choose the right business structure for registering your company by considering what benefits your business the best. Common business structures in the USA include Limited Liability Company (LLP), S corp, C corp, and Non-profit corporation.
LLC Share features of both corporation and partnership business entities. Under LLC your assets won’t be at risk in case you face bankruptcy or get sued as it protects you from personal liabilities. The profit of an LLC is passed through the personal income of the members. The members are considered self-employed and subjected to pay self-employment taxes and not corporate taxes. LLCs are best suited for business with higher risks because it protects the owner’s personal assets and those businesses who want to pay fewer taxes than they should pay as a corporation.
C corp is a separate legal entity. It is the most commonly adopted business structure across the US. C Corp provides the strongest protection to the stakeholders from personal liabilities. It also costs more to form a corporation than any other business structure. There are no restrictions on the maximum number of stakeholders. They can raise the funds by selling their shares, which can also attract employees. C corps will be taxed as a corporation. Sometimes the profit from C corp is taxed twice, from the company profit and again from the personal tax returns of the stakeholders after the dividends are paid. The compliance procedure for the C corp is more complex than other entities. It is best suited for companies who are seeking investments from angel investors and venture capitals and go public or eventually be sold.
S Corp is the business structure that is designed to avoid the double taxation that might happen in C corp. S corp can have multiple stakeholders but not more than 100 but all the stakeholders must be US citizens. Hence only people who are US citizens are eligible for S corp and citizens of foreign counties can’t. Under S corp only corporate taxes are paid by the corporation, not by the stakeholders. Taxation of S corp varies from state to state as per the state rules and regulations.
Nonprofit corporation mostly includes organizations that do charity, education, religious or scientific work. Nonprofits can have tax exemption benefits as their work benefits the public. They don’t have to pay state or federal taxes for the profit their make like other business structures. But they need to follow some federal rules and regulations about what they do with the profit they make.
NOTE: - Non-residents can only register their business as LLC or C corp
