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AUGUST/SEPTEMBER, 2007
Pros & Cons SOLE PROPRIETORSHIP AND GENERAL PARTNERSHIP BENEFITS -- No special filings or rules for operating the business. -- Profits and losses reported on owner's personal income taxes. DRAWBACKS -- No protection from liability or claims against the business. REGISTRATION REQUIREMENTS AND FEES -- None. LIMITED LIABILITY COMPANY (LLC) BENEFITS -- Owners have limited personal liability for claims against the business. -- Flexibility to apportion profits and losses. DRAWBACKS -- Distributions subject to self-employment taxes. -- Venture capital and other investors prefer more traditional corporate structures. REGISTRATION REQUIREMENTS -- Articles of organization must be filed with a state business filing office. REGISTRATION FEES -- Usually under $100. S CORPORATION BENEFITS -- Personal liability for claims against a business is limited. -- Profits and losses reported on owners' personal income tax statement. -- Salaries are subject to income and employment taxes. DRAWBACKS -- Profits and losses can be allocated only in proportion to each shareholder's ownership interest. -- Some states and municipalities tax S corporations as regular C corporations. REGISTRATION REQUIREMENTS -- Owners file articles of incorporation with the state business filing office, IRS Form 2253, and possibly state forms. FILING FEES -- Depend on the number and type of shares authorized. C CORPORATION BENEFITS -- Extensive case law that supports business owners' limited personal liability for claims against the business. -- Lower tax rates on income between $50,000 and $75,000. -- Favored by venture capital and equity investors. DRAWBACKS -- Income is taxed once at the corporate level and again when distributed to shareholders as dividends. -- Separate tax structure requires separate accounting and reporting. -- Administrative overhead such as a board of directors and annual meetings. REGISTRATION REQUIREMENTS -- Owners file articles of incorporation with the state business filing office. REGISTRATION FEES -- Depend on the number and type of shares authorized. DATA: LLC OR CORPORATION? HOW TO CHOOSE THE RIGHT FORM FOR YOUR BUSINESS BY ANTHONY MANCUSO 
BW MALL
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