Limited Liability Company (LLC)

The LLC is relatively new type of hybrid business structure that is no permissible in most states. It is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. Formation is more complex and formal than that of a general partnership. The owners are members, and the duration of the LLC is usually determined when the organization papers are filed. The time limit can be continued if desired by a vote of the members at the time of expiration. LLC's must not have more than two of the four characteristics that define corporations: Limited liability to the extent of assets; continuity of life; centralization of management; and free transferability of ownership interests.

Corporation

A corporation, chartered by the state in which it is headquartered, is considered by law to be a unique entity, separate and apart from those who own it. A corporation can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are it's shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of it's own and does not dissolve when ownership changes.

S Corporation

Tax election only; this election enables the shareholder to treat the earnings and profits as distributions, and have them pass thru directly to their personal tax return. The catch here is that the shareholder, if working for the company, and if there is a profit, must pay themselves wages, and it must meet standards of "reasonable compensation". This can vary be geographical region as well as occupation, but the basic rule is to pay yourself what you would have to pay someone to do your job, as long as there is enough profit. If you do not do this, the IRS can reclassify all of the earnings and profit as wages, and you will be liable for all the payroll taxes on the total amount.

Professional Corporation

A legal structure authorized by state law for a fairly narrow list of licensed professions, including lawyers, doctors, accountants, many types of higher-level health providers and often architects. Unlike a regular corporation, a professional corporation does not absolve a professional for personal liability for their own negligence or malpractice. The main reason why groups of professions choose this organizational structure is that, unlike a general partnership, owners are not personally l iable for the malpractice of other owners.

Nonprofit Organization

A non-profit organization is a group organized for purposes other than generating profit and in which no part of the organization's income is distributed to it's members, directors, or officers. Non Profit corporations are often termed "non-stock corporation". Non-profit organizations must be designated as nonprofit when created and may only pursue purposes permitted by statutes for non-profit organizations. Non-profit organizations include churches, public schools, public charities, public clinics and hospitals, political organizations, legal aid societies, volunteer services organizations, professional associations, research institutes, museums and some governmental agencies.