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When you form a new business one of the first choices you will make is what entity type it will be. The two most common are Corporations or Limited Liability Companies (LLC). A corporation is owned by its shareholders. LLCs are owned by one or more individuals.
The most common types of Corporations are C Corporations, S Corporations and Nonprofit Corporations. C Corporations are the most common forms of a corporate entity and are best for businesses that sell products, have a storefront and employees. A C Corporation has the widest range of deductions and expenses. S Corporations may be a good choice when you have a service to sell and for people looking for protection and structure of a corporation. An S Corporation pays no tax on the corporate level, but the shareholders pay tax on the individual level. Both C Corporations and S Corporations provide limited liability protection for their assets and separate the owners from the business. Nonprofit Corporations are for groups that form for charitable, educational, religious, literary or scientific purposes and they must apply for tax-exemption.
A Limited Liability Company (LLC) may be best for people who want an entity to hold real estate or other appreciating assets. There is more flexibility with taxes and greater asset protection with a LLC. LLCs also have fewer corporate formalities. LLCs provide limited liability protection for their assets and also separate the owners from the business.
Deciding which type of business entity to form and going through this process can be time-consuming and stressful, but we are here to help you! Schedule an appointment today!
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