Xirxi Business

Help me choose Business Structure

Which business structure is right for me?

  •  

  • S Corporation

  • C Corporation

  • LLCs

  • DBA


  • Recommended For
  • Owners wanting the liability protection of a corporation, with the simplicity of pass-through taxation of
  • Owners needing maximum tax and ownership flexibility, combined with liability protection
  • Owners wanting the simplicity of pass-through income taxation and the liability protection of a corporation with less formalities. Great for passive income and real estate investments.
  • Owners wanting to legally do business as a particular name without having to create an entirely new or amend and existing business entity

  • Ownership
    • Shareholders (restrictions against corporate reholders, nonresident aliens, and > 100 shareholders)
    • Shareholders
    • Members
    • Owners

  • Personal Liability
    • Shareholders typically not liable for corporate debts
    • Shareholders typically not liable for corporate debts
    • Members typically not liable for debts of LLC
    • Owners are personally liable for all debts of the business

  • Formalities & Record Keeping Requirements
    • Formal board and shareholder meetings and minutes
    • Annual state report
    • Formal board and shareholder meetings and minutes
    • Annual state report
    • Annual state reports
    • Must renew your application and publish(if required) every 4-5 years depending on state

  • Taxation
    • No tax at entity level
    • Income/loss passed through to shareholders
    • Taxed at entity level
    • If dividends distributed to shareholders, dividend income taxed at individual level
    • By default, no tax at the entity level if properly structured
    • Income/loss is passed through to members (as in a partnership or sole proprietorship)
    • May opt to be taxed as C or S Corporation.
    • Schedule C
    • If Partnership Schedule K-1

  • Tax Reporting
    • Income on Form 1120S
    • Salaries on Form W-2
    • Profit distribution on Schedule K-1
    • Income on Form 1120
    • Salaries on Form W-2
    • Profit distribution on Form 1099-DIV
    • Income on Form 1040, Schedule C OR Form 1065 & Schedule K-1 for profit distributions
    • Schedule C
    • If Partnership Schedule K-1

  • Management & Operation
    • Managed by directors, elected by
    • Day-to-day operations run by officers appointed by directors shareholders
    • Managed by directors, elected by shareholders
    • Day-to-day operations run by officers appointed by directors
    • Flexibility similar to a partnership
    • An operating agreement typically outlines management duties
    • Optional board of managers
    • Managed by owners

  • Formation Requirements
    • State filing
    • Subchapter S election with IRS typically required within 60 days of formation. To select, simply check one-question option on Xirxi Business’s questionnaire
    • State filing
    • State filing
    • State or county DBA filing required generally before using your DBA, and in some cases within 30-40 days of your first business transaction
    • Some states require a published notice in local newspaper along with proof of fulfillment