Do you know the three (3) types of Business Entities?
Ownership Rules:
- Personal Liability of the Owners
- Business forming Key Documents
- Management of the Business
- Up to 100 shareholders; only
one class of stock allowed.
- Generally no personal liability of
the shareholders.
- With the filing of IRS form 2553, a C Corporation becomes a S Corporation; where the profits and losses are passed through to the
shareholders.
- Articles of Incorporation.
- By Laws; Organizational Board
Resolution, Stock Certificate, Stock Ledger, IRS & State S Corporation election.
- Board of Directors have overall management responsibility; Officers have day-to-day
responsibility.
- Shareholders typically purchase stock in the corporation; however, only one class of stock is allowed.
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- Unlimited numbers of members allowed.
- Generally no personal liability of the members.
- The entity is not taxed (unless chosen to be taxed); profits and losses are passed through to the members.
- Articles of Organization/ Certificate of Formation, Operating Agreement.
-The Operating Agreement sets forth how the business is to be managed; a Member(owner) or Manager can be designated to manage the business.
- The members typically contribute money or services to the LLC and receive, and interest in profits and losses.
Limited Liability Company (LLC)
- Unlimited numbers of
shareholders; no limit on stock classes.
- Generally no personal liability of the shareholders.
- Corporation taxes on its earnings
at corporate level and shareholders
are taxed on any distributed dividends
- Articles of Incorporation.
- By Laws; Organizational Board Resolution, Stock Certificate, Stock Ledger.
- Board of Directors have overall
management responsibility; Officers have day-to-day responsibility.
- Shareholders typically purchase
stock in the corporation, either
common or preferred.
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