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Entity Formation

Here at Reeder and Associates we offer formation services for a variety of entities. If you are interested in forming an entity please visit our Entity Formation Questionnaire to get started.

Limited Liability Company (LLC)

A limited liability company is a hybrid-type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership.

The “owners” of an LLC are referred to as “members.” Depending on the state, the members can consist of a single individual (one owner), two or more individuals, corporations, other LLCs, and even other entities.

Unlike shareholders in a corporation, LLCs are not taxed as a separate business entity. Instead, all profits and losses are “passed through” the business to each member of the LLC. LLC members report profits and losses on their personal federal tax returns, just like the owners of a partnership would.

Corporation

A corporation is an independent legal entity owned by shareholders. This means that the corporation itself, not the shareholders that own it, is held legally liable for the actions and debts incurred by the business.

A corporation is an independent legal entity. This means that the corporation itself, not the shareholders that own it, is held legally liable for the actions and debts incurred by the business.

Corporations are more complex than other business structures and tend to have costly administrative fees and complex tax and legal requirements. Because of these issues, corporations and generally suggested for established, larger companies with several employees.

S-Corporation

An S Corporation or S Corp is a special type of corporation created through an IRS tax election. An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S corporation.

What differentiates the S Corp from a traditional corporation (C Corp) is the ability to have profits and losses pass through to the shareholder's personal tax return. Consequently, the business is not taxed itself, only the shareholders. There is an important caveat, however: any shareholder who works for the company must pay him or herself "reasonable compensation." Basically, the shareholder must be paid fair market value, or the IRS might reclassify any additional corporate earnings as "wages."