Please read each passage below, I need a few sentences in response to each part. Please label Part 1 passage part 1 and the same with the other one. It’s okay if you use in text citation (please use properly) and cite the reference(s).
PART 1
Limited Liability Company’s (LLCs), C corporations, and S corporations each have their own set of benefits and drawbacks. The sort of business you choose should be the most advantageous to you. Taxes and shareholder size are two key distinctions between a C and a S business. Earnings are taxed at the corporate level, and losses do not flow through to shareholders when C corporations declare profits or losses. Dividends paid by a corporation to its shareholders, on the other hand, will be taxed. As a result, the profit is taxed twice: once at the corporate level and again at the shareholder level since the firm paid dividends. The number of shareholders in a C company is limitless, but the number of stockholders in a S corporation is restricted to 100. “A Chapter C company (or C corporation) is a big, publicly listed business with an unlimited number of domestic and international shareholders,” according to Wikipedia (Seaquist, 2012).
An LLC provides the same limited liability protection as a C or S company while also allowing for taxation to be passed through. Profits and losses are passed through to shareholders in a S company, but profits and losses are passed through to the owner in an LLC, and taxes are paid on an individual basis. “By default, an LLC is considered as a “pass through entity,” meaning earnings and losses are distributed to the shareholders directly” (Taulli, 2016). Individual taxation allows for the writing off of losses and may result in fewer taxes being paid. If I were beginning a business, I would first organize an LLC and then convert to a S corporation after a few years.
My firm may not be successful for the first couple of years, and I may wish to deduct those losses on an individual tax return. I will not be held personally responsible for all of my debt if I go in debt and am unable to pay my creditors. Your personal assets, such as your home, vehicle, or any other assets you possess, will be protected from creditors. “Because a corporation is regarded as a distinct entity from its owners, its investors are not personally responsible for corporate obligations beyond their investment in the firm” (Seaquist, 2012).
With an LLC, there is less risk for owners and stockholders, as well as fewer paperwork and processes and rules to follow. For a startup, this would be the most straightforward path. However, after a few years as an LLC and my company is now profitable, I may convert to a S corporation. You still have the benefit of safeguarding your personal assets and avoiding both personal and corporate taxes as a S company. I’ll also be able to pay myself a salary and take a part of the earnings, something I won’t be able to do with an LLC.
References:
Seaquist, G. (2012). Business law for managers. Zovio.
Taulli, T. (2016) When to form an LLC (Limited liability company). Forbes. Retrieved
from https://www.forbes.com/sites/tomtaulli/2016/07/24/when-to-form-an-llc-limited-liability-company/#57bba85a4e0d
Part 2
When to form an LLC (Limited Liability Company) discusses why the LLC is one of the most popular types of business entity.
Every LLC has different positive and negative meaning to it whether it’s a single LLC or a multiple members. I believe that a lot of individuals choose to use this method of corporation even with the downfalls of not easily able to make money. The understanding of the article gives the basis of individuals can go in this situation and if done correctly will not lose their personal assets. They also will be able to make some sort of revenue from using this LLC form. Even though it has drawbacks of its heart to raise money or recruit money that doesn’t mean it can’t be done.
After reading the article and Chapter 30 of the textbook, compare an LLC with a C corporation and with an S corporation. If you were operating your own business, would you choose the LLC as the organizational form for your business? Explain your reasoning.
We don’t want to scare off future investors so even if we did use the LLC form we would still be up under the c corporation. Even though certain things will be complicated whether it’s paper trails of taxes or trying to create stocks and bonds and dividends I believe it will be all worth it in the long haul. When we would first start out it will probably be a singular organization once the backing comes available to it from other individuals who understand the thought process and the ideas of what we are trying to establish in sale whether it’s a product or service. Then more legal locations will come to whether this changes the original business plan to further invest with shareholders.
Seaquist, G. (2012). Business law for managers. Zovio.
Taulli, T. (2016, July 24) When to form an LLC (Limited liability company). Forbes. Retrieved from http://www.forbes.com/sites/tomtaulli/2016/07/24/when-to-form-an-llc-limited-liability-company/#289ac1051307
