Legal Question in Business Law in Alabama

Re: Difference of Corperations

The biggest difference in the companies are the tax consequences for each.

"S" Corporation receives the IRS treatment of a partnership without the personal liability for loss of a partnership. So, income would be taxed to each shareholder, without a separate income tax to the company. There are several restrictions on the kind and maximum number of shareholders allowed in order to receive this tax status.

"C" Corporations are "double" taxed. The Corporation will pay income tax, and the shareholders will pay income tax on their dividends once they are received. The shareholders are shielded from liability to the point of their investment.

LLC - is designed to give all the benefits of the partnership and the corporation without the disadvantages of each. In this type of company, there can be two types of partners: Limited, where the partner's liability is limited to the amount of their investment; and, General Partners whose liability is the same as the personal liability as in a partnership.