You have done your due diligence and have decided to
incorporate your new business. The next step is to determine which type
of corporate structure best fits your organization. Determining the
appropriate corporate structure can be tricky. In some cases, it
requires you to gaze into a crystal ball and see the future.
Fortunately, new businesses in Rancho Cucamonga, CA have the experience
and knowledge of Whyte and Associates to guide them through the process.
There are three corporate structures to consider – a Limited Liability Company, S-Corp, or C-Corp. Each of these structures offers varying levels of personal liability protections to the owners of a company. Let’s look at each of these a bit closer.
Many feel LLCs offer the best of both worlds between being a corporation and a partnership. Some of the advantages and disadvantages of an LLC are:
An S-Corp is different from a corporation only in how the
tax structure if handled. It combines many of the same benefits of a
sole-proprietor, partnership, and corporation. One of the biggest
benefits of operating as an S-Corp is the issue of double-taxation,
which arises when a company pays taxes based on its profits and then
taxed again when dividends are reported on their personal return. Like
C-Corps, S-Corp owners are not responsible personally for any business
debt. There are guidelines used to determine whether a business can be
treated as an S-Corp. Whyte & Associates are able to assist you in
determining whether your business would benefit from and qualify for
becoming an S-Corp.
Becoming a C-Corp will offer new businesses the most amount of protections for its stockholders from the businesses debt and liabilities. Any liability would be limited to the extent of the stockholders investment. This type of structure is the most expensive to form as it has more legal formality. In addition, C-Corps are more federally and state regulated than other forms of structure.
However, there are big plusses to forming a C-Corp. One of the biggest benefits is the ability to raise funds through the sale of stocks or bonds allowing for increased cash flow when needed. There are no limits as to the life of the corporation. It can be sold, transferred, or extend past the life of its stockholders. In addition, a transfer of ownership does not require a change in management. There are tax-free benefits for certain benefits such as retirement plan contributions, insurance, and travel.
Due to the complex nature of determining an appropriate structure, Whyte and Associates is available in the Rancho Cucamonga and surrounding areas to advise and assist new business with this process. Call (909) 575-0080 our offices today to schedule a consultation.