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DESCRIPTION
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C-CORPORATION
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LLC (Limited Liability Company)
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| Formation Requirements, Costs |
Must file with state, state specific filing fee required. In most States need to file Article of Incorporation to initiate the incorporation.
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Must file with state, state specific filing fee required. In most States need to file Article of Organization to initiate the formation.
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| Type of Ownership |
Stock, there maybe different classes.
You can setup common stock, class A, Class B, Preferred, etc'.
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Membership Interests. There may be different classes of membership. Ownership doesn't come in the form of stocks and there are no "shareholders". The owner is a "Member" and the stocks are "Membership Interest".
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| Liability of Owner |
There is limited liability for shareholders, officers, and directors. Shareholders are not typically held liable.
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There is limited liability for owner(s) and manager(s). Members are not typically held liable.
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| Ownership agreement |
Shareholders agreement - will structure the rights and responsibilities of the shareholders. |
Operating Agreement - will establish the relationship between the member(s) and constitute the LLC. |
| Eligible Owners |
No restrictions. Owner can be a non-us-resident individual or a non-usa-resident corporation. C. Corporation can be owned by one shareholder - "sole owner" or unlimited number of shareholders.
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No restrictions. LLC can be formed by a sole owner, one member. The sole member can be non-us-resident individual or a non-usa-resident corporation. The LLC can be formed by a sole-member, one-member-llc or unlimited umber of memebrs.
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| Management |
Managed by director(s) and officer(s). Director(s) and officer(s) may be a non-us-resident alien and they don't have to be present in the US. Shareholders elect directors who manage business activities.
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Managed by all members or designated manager(s). Member(s) and Manager(s) may be a non-us-resident alien and they don't have to be present in the US. Members can set up structure as they choose.
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| Administrative Requirements |
Election of board of directors/officers, annual meetings, and annual report filing requirements. |
Relatively few requirements. |
| Ease of Operation |
Must have annual meetings, Board of Directors meetings, corporate minutes, and stockholder meetings. |
Simple, no special requirements. Some States will request annual filling. |
| Allocations of Ownership |
No. Dividends must be paid based upon stock ownership.
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Permitted if the allocations have substantial economic effect.
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| Transfer of Ownership |
Shares freely transferred. Shares of stock are easily transferred from one shareholder to another. There are no restrictions or limitations.
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There maybe restrictions under certain state laws. Possibly, depending on restrictions outlined in the operating agreement.
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| Capital Raising |
Shares of stock are sold to raise capital (Securities laws apply). |
May sell interests, but subject to operating agreement (Securities laws may also apply). |
| Liabilities and Basis |
Not increased.
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Increased.
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| Tax Upon Sale |
Potential double taxation. Corporation is taxed on sale of assets, shareholders taxed on dividends or capital gains tax.
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Single tax at member level upon sale of appreciated assets. Generally, no tax on distribution of appreciated assets.
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| Fringe Benefits |
Shareholders - Employees are eligible for most.
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Members are ineligible for certain ones.
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| Pass Through of Losses |
Losses not passed through.
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Losses passed through to members, subject to certain restrictions.
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| Fiscal Year |
May use any fiscal year. Personal Service Corps must use a calendar year, subject to certain exceptions.
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Must use tax year of members having a majority interest in the LLC, or the tax year of all principal member if there is no majority member.
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| Duration |
Indefinitely. can extend past death or withdrawal of shareholders.
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Dissolves at the time specified in the Operating Agreement or upon the loss of a member unless other members agree to continue.
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| Taxation |
Taxed at corporate rate and possible double taxation: Dividends are taxed at the individual level if distributed to shareholders. |
No tax at the entity level. Income passed through to members. |
| Double Taxation |
Yes, taxed at corporate level and then again if distributed to shareholders in the form of dividends. |
No |
| Pass Through Tax Treatment |
No |
Yes |
| Tax Forms |
Corporate Tax Return - IRS Form 1120 |
1 member: sole proprietor IRS Form 1040 - Schedule C Partnership: IRS Form 1065, Members get K-1 |