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Raising capital

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Easy maintenance

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Based on your answers, the majority of On Call lawyers recommend:

Best Choice

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LLC

  • Common for small businesses
  • Raise money using bank loans
  • Variety of management structures you can implement
  • Relatively easy compliance requirements
  • Taxes paid on personal tax returns
  • Limited tax deductions
  • Formation fees are tax deductible

C-Corp

  • Raise money from investors
  • State-defined management structures
  • Potential double taxation
  • Wider range of tax deductions
  • Formation fees are tax deductible

S-Corp

  • Limited to 100 shareholders
  • State-defined management structures
  • Taxes paid on personal returns
  • Wider range of tax deductions
  • Formation fees are tax deductible
  • Can only be owned by U.S. residents

Non-Profit

  • Common for charities
  • Tax-deductible donations
  • Strict state management structures
  • Wide range of tax deductions
  • Formation fees are tax deductible
Any recommendation is based on a survey of Rocket Lawyer On Call attorneys and does not constitute legal advice.

Want to compare all the details?

LLCS-CorpC-CorpNon-ProfitSole Proprietorship
Managing your business
plusMinusIconLimited liability protection
LLC members are not personally responsible for business debts or liabilities. C-Corp shareholders are not personally responsible for business debts or liabilities.S-Corp shareholders are not personally responsible for business debts or liabilities.Non-Profit directors are not personally responsible for NPO debts or liabilities.Sole Proprietors are personally responsible for business debts and liabilities.
plusMinusIconPerpetual existence varies
With the proper planning, LLCs can exist for generations.S-Corps continue to exist even if the owners or majority shareholders leave or pass away.C-Corps continue to exist even if the owners or majority shareholders leave or pass away.Non-Profit organizations and institutions survive after their directors leave.Sole Proprietorships do not exist when the owner quits or passes away.
plusMinusIcon Favorable for raising capital varies
LLCs can raise money via banks and investors but cannot sell stocks.S-Corps can get loans from banks, as well as distribute stock to up to 100 people.C-Corps have the easiest time raising capital as there is no cap on how many people can own stock.Non-Profits can both get loans and receive tax-deductible donations.Sole Proprietorships can occasionally receive bank loans but cannot sell stocks.
plusMinusIconManagement flexibility
LLCs allow for a large variety of management structures based on your specific needs.Management structures for S-Corps are largely dictated by state and federal law.Management schemas for C-Corps are largely dictated by state and federal law.NPOs need to follow strict management laws to guard their non-profit status. Since Sole Proprietorships have only one member, there is no management structure.
Tax Considerations
plusMinusIconPass-through taxes
LLC members are taxed on their personal tax returns. The LLC itself is not taxed.S-Corp shareholders are taxed on their personal tax returns. The company itself is not taxed.C-Corps are taxed both at the corporate level and again on shareholders' individual returns.Non-Profits are taxed on a corporate level but may also enjoy a host of tax-exempt benefits.Sole Proprietorships are taxed only on their owner's tax return.
plusMinusIconDouble taxation
Since LLCs can be a pass-through entity, owners are taxed on their personal income.S-Corp shareholders are taxed personally. The S-Corp, however, is not.C-Corp income is taxed at the corporate level first, then again at the personal level. This is called "double taxation."Non-Profits are only taxed once and can write off most of their expenses. Sole Proprietors are taxed only on their personal tax return.
plusMinusIconTax exemptions
LLCs can claim deductions but not tax-exempt status.S-Corps can claim deductions but not tax-exempt status.C-Corporations are not tax-exempt entitiesNot only are donations to Non-Profits tax-exempt, but NPOs can themselves apply for tax-exempt status. Sole Proprietorships are the least official business entity and cannot claim tax exemption.
State government fees
plusMinusIconFormation fees
LLCs must pay state fees during the incorporation process. These fees are tax deductible.S-Corps must pay state fees to legally incorporate. These fees are tax deductible.C-Corps must pay state fees to become legally recognized. These fees are tax deductible.Non-Profits pay state fees when they incorporate. These fees are tax deductible.Since Sole Proprietorships aren't incorporated entities, they don't pay formation or compliance fees.
plusMinusIconCompliance fees
While LLCs have less compliance requirements than other entity types, there are reports and licenses that need to be filed and maintained.S-Corps usually will need to file reports and pay compliance fees on an annual or semi-annual basis. C-Corps generally must file reports with their state, as well as a host of other regulatory and compliance fees.Non-Profits have more compliance responsibilities than other entities as they must continually preserve their tax-exempt status.Sole Proprietors do not have ongoing compliance fees.
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