Understanding Company Types

Understanding Company Types

Owning a business entails choosing the best business alternative that will save and/or gain you the most money. But unawareness about what each option involves may leave you feeling confused and overwhelmed. Here is a breakdown that should make your decision process easier.


Having a limited liability company (LLC) means you are not required to pay any taxes on your business. Instead, you’ll be taxed on your share of the profits earned through your business.

S Corporation

There’s no self-employment tax with an S-corp, but you will have to pay half of the Social Security and Medicare taxes of your employees. Still, after paying your staff, you get to pay yourself a salary and dividends from extra profit you earn. What you saved in self-employment tax won’t matter until you’ve earned enough to have excess after making your required compensation payments.

C Corporation

C-corps are taxed on the earnings of the corporation itself, unlike other business options. The downfall is that C-corps can be subject to paying double taxes.

Sole Proprietorship

Like an LLC, you are taxed on your personal earnings from your corporation in a sole proprietorship. But there’s a catch. Your personal assets can be affected if your business is sued.

To learn more about the difference between LLC, S-corp, C-corp and a sole proprietorship, or for legal help, visit the Law Office of Michael Lilly in Jonesboro, Arkansas.