Various entity types
LLC (Limited Liability Company) - classification for taxation:
- Single member
- Partnership
- C-Corp
- S-Corp
INC (Incorporation)
- C-Corp
- S-Corp
LLC
- Has members and membership units
- Ideal for small businesses with 1-2 partners
- The 4-type classification is for taxation purpose, of which C & S Corp are by election
LLC pros & cons
LLC pros: Limited liability shields personal assets; flexible taxation options; simple paperwork; adaptable management structure
LLC cons: Potential self-employment taxes; limited capital raising avenues; credibility perception among investors
INC
- Has shares and share capital
- Ideal when entity has multiple investors, outside shareholders, and needs shares to be issued
- The 2-type classification is for taxation purpose, in which C Corp is default and S Corp can be opted for by election
INC pros & cons
Inc pros: Asset protection; easy capital raising through shares; boosted credibility for investors; scope for employee stock option attracts good talent.
Inc cons: Risk of double taxation (entity profits & shareholder dividends); complex paperwork and regulations (compared to LLC); limited management flexibility.
Generally, Inc C Corp (as S Corp election is ruled out with foreign investors) is the most recommended entity type for foreign companies registering entity in the US.
However, each business is unique. It's important to consult with professionals to determine the best fit for your specific goals and circumstances.
*The information provided on this article does not, and is not intended to, constitute legal advice; instead, all information and content provided here is for general informational purposes only.