There are several business operating structures to consider including the following:
1. S Corporation
A S corporation (sometimes referred to as an S Corp) is a special type of corporation created through an IRS tax election.
The partnership is a single business where two (2) of more people share ownership.
3. Limited Liability Company
The limited liability company (LLC) 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.
(C 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 the business incurs.
5. Sole proprietorship
A sole proprietorship is the simplest and the most common structure chosen to start a business. It is a business owned and run by one individual with no distinction between the business and you, the owner.
A cooperative is a business or organization owned and operated for the benefit of those using its services. Profits and earnings generated by the cooperative are distributed among the members, also known as user-owners.
An S corporation (sometimes referred to as an 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.
An S corp. is a corporation with the Subchapter S designation from the IRS. To be considered an S corp., you must first charter a business as a corporation in the state where it is headquartered.
According to the IRS, S corporations are "considered by law to be a unique entity, separate and apart from those who own it." This limits the financial liability for which you (the owner or shareholder are responsible. Nevertheless, liability protection is limited - S corps do not necessarily shield you from all litigation such as an employees tort actions as a result of a workplace incident.
What makes the S corp. different from a traditional corporation (C corp.) is that profits and losses can pass through to your personal tax return. Consequently, the business is not taxed itself.
Only the shareholders are taxed. There is an important caveat, however: any shareholder who works for the company must pay him or hers elf "reasonable compensation." Basically, the shareholder must be paid fair market value, or the IRS might reclassify any additional corporate earnings as "wages."
Forming an S Corporation
Before you form an S Corporation, determine if your business will qualify under the IRS Stipulations.
To file as an S Corporation, you must first file as a corporation. After you are considered a corporation, all shareholders must sign and file Form 2553 to elect your corporation to become an S Corporation.