According To Irs What Is A Flow Through Entity Business Entity Forms – Part II: C Corp, S Corp, LLC, Series LLC

You are searching about According To Irs What Is A Flow Through Entity, today we will share with you article about According To Irs What Is A Flow Through Entity was compiled and edited by our team from many sources on the internet. Hope this article on the topic According To Irs What Is A Flow Through Entity is useful to you.

Business Entity Forms – Part II: C Corp, S Corp, LLC, Series LLC

C Corporation

A corporation is a legal entity owned by its shareholders (owners). Since it is an entity separate from its shareholders, owners are protected from personal liability for the corporation’s debts and liabilities. The most common form is a C corporation. A C Corp is taxed under the Internal Revenue Code, Subtitle A, Chapter 1, Subchapter C, unless it elects to be taxed under Subchapter S. C Corps are subject to double taxation: First, the C Corp itself is taxed annually on its earnings. ; And second, shareholders are taxed when they receive these earnings as dividends. A California C Corp is taxed at a rate of 8.84 percent on its net income; It is subject to a minimum annual franchise tax of $800. Estimated annual tax must be paid in four installments.

A C corporation must follow certain formalities to avoid losing its corporate status and protections. For example, it should frame bye-laws that regulate shareholders’ meetings, define the scope of directors’ powers, etc.

Pros:

– Generally, there is no personal liability.

– Ownership can be easily transferred through the sale of stock.

– The corporation survives the death of the owners.

– Owners can issue and sell stock to investors to raise capital.

Cons:

– More expensive to set up and maintain than a sole proprietorship or partnership.

– Potential double taxation.

– Current filing and reporting requirements.

S Corporation

An S Corp is a regular corporation or any business entity, (ie a partnership or LLC that elects to be taxable as a corporation), that elects to be taxed under Subchapter S of the Federal Tax Code. An S Corp is not taxed at the organization level and profits go directly to the owners. A California S Corp is taxed at a rate of 1.5 percent on its net income. Estimated annual tax must be paid in four installments.

Pros:

– Avoid double taxation.

– Generally, there is no personal liability.

– Usually survives the death of its owners.

Cons:

– There cannot be more than one class of stock.

– Current filing and reporting requirements.

– One hundred shareholders max.

Limited Liability Company (LLC)

An LLC combines the favorable tax treatment of a partnership with a corporate shield from personal liability. Liability for debts and liabilities of LLC owners is limited to their financial investment, although members have the right to participate in the management of the company like general partners.

In California, for income tax purposes, an LLC with more than one member is taxed as a partnership, and an LLC with a single individual member is taxed as a sole proprietorship. An LLC can instead elect to be taxed as a corporation by filing an election on Form 8832 with the IRS. Aside from an $800 minimum annual tax for the privilege of doing business in the state, California taxes LLCs and their owners the same way the IRS does. An LLC, whether California or foreign, cannot provide professional services.

Pros:

– Easier and faster to form than a corporation.

– Generally, there is no personal liability.

– No double taxation.

– One of the least burdensome requirements for corporate filings.

Cons:

– It is more complicated to form than other forms of partnership and sole proprietorship.

– Transferring ownership can be difficult since LLCs do not issue stock.

Series Limited Liability Company (Series LLC)

A series LLC is one of the newer corporate forms for a master LLC that has subsidiaries that operate as separate LLCs, each shielded from liability for the actions of the other LLCs. A Series LLC cannot be formed in California, but a Series LLC formed in another state can register with the California Secretary of State and do business in California. Both Delaware and Nevada allow the formation of Series LLCs.

Pros:

– Each unit can be managed independently from the others.

– Each unit has its own assets and liabilities.

– Each unit is protected from liability for wrongful acts of other units.

– Owners enjoy personal liability protection.

– Each unit may be in the same business as the master LLC or conduct its own business.

– Units can be created and dissolved by simple amendments to the operating agreement, without filing with the state. Hence, reduced legal, accounting and administrative fees that would otherwise be incurred by multiple unconnected LLCs.

Cons:

– Each unit must keep separate records.

– Since a Series LLC is a new entity, its tax status is uncertain and case law in some states is undeveloped. The IRS did not say whether each unit should be taxed as a separate entity.

Video about According To Irs What Is A Flow Through Entity

You can see more content about According To Irs What Is A Flow Through Entity on our youtube channel: Click Here

Question about According To Irs What Is A Flow Through Entity

If you have any questions about According To Irs What Is A Flow Through Entity, please let us know, all your questions or suggestions will help us improve in the following articles!

The article According To Irs What Is A Flow Through Entity was compiled by me and my team from many sources. If you find the article According To Irs What Is A Flow Through Entity helpful to you, please support the team Like or Share!

Rate Articles According To Irs What Is A Flow Through Entity

Rate: 4-5 stars
Ratings: 9929
Views: 41542841

Search keywords According To Irs What Is A Flow Through Entity

According To Irs What Is A Flow Through Entity
way According To Irs What Is A Flow Through Entity
tutorial According To Irs What Is A Flow Through Entity
According To Irs What Is A Flow Through Entity free
#Business #Entity #Forms #Part #Corp #Corp #LLC #Series #LLC

Source: https://ezinearticles.com/?Business-Entity-Forms—Part-II:-C-Corp,-S-Corp,-LLC,-Series-LLC&id=6776428

Related Posts