Do you know the difference between a C Corporation and an LLC? Identifying the right business structure is confusing for the average person. But forming a new business in the Chicagoland, IL area is much easier with the assistance of an experienced accounting firm like Michael Kimmey & Associates. We’ll explain the tax consequences related to each type of business structure and together we’ll find the best choice for your new business. Contact us at 630-581-7007 and set up a free initial consultation today to get started.
A Limited Liability Corporation or LLC is a legal form of company that allows you to protect your personal assets from the company’s liabilities. If your business is structured this way the "members" or owners will have no personal responsibility for the financial obligations of the business. With an LLC the business itself does not report taxes on its profits but uses "pass-through" taxation where the income and deductions are reported on the personal income tax returns of the members.
There are benefits to structuring as a C Corporation but one drawback is that the business is taxed on profits at two different points (double taxation). First when the profits are earned and again when the money is distributed to shareholder’s as dividends. One positive feature is that the owners are not held personally liable for the financial obligations of the business.
S Corporations are similar to C Corporations in a number of significant ways except that they are only taxed on the profits once. The company itself does not pay taxes but the income from the company is passed through to shareholders and they are required to report any income from the business on their own personal tax returns.