Whether you are just starting out or you have been running a business for a while, a fantastic way to build business credit, increase your company’s credibility, and protect your personal assets is through business incorporation. Business incorporation is the legal process by which your business becomes a separate entity from you, the owner.
There are three main types of corporations we want to bring to your attention: limited liability companies, S-corporations, and C-corporations.
- LLC- A limited liability company is not technically a corporation, but it provides a lot of the same benefits. An LLC is a business structure that protects business owners from taking personal responsibility for liabilities or debts. It’s a very flexible structure because there are tax options. LLCs are subject to “pass-through taxation,” meaning they don’t have to pay federal corporate income tax. However, they can choose to be taxed as an S-corp or a C-Corp if they choose. LLCs are easy to form and require little paperwork.
- S-corp- An S-corp is a tax status, and the main reason business owners might choose this type is to save on taxes. S-corps allow you to take out a dividend, which is the sum that remains after you pay yourself a reasonable salary. Because you don’t pay taxes on the dividend, you can potentially save thousands of dollars.
- C-corp- A C-corp is a business structure that is a separate legal entity from its owners and shareholders. A C-corp has a perpetual existence, offers limited liability protection, and allows unlimited shareholders. It also allows you to keep profits in the business without being taxed, which is why business owners might choose it. However, it is also subject to double taxation.
If you have questions about what business incorporation can do for you, contact us at DKC Financial Inc. today.