Corporations

S Corporation
Advantages:
1.Easier to raise capital.
2.Can minimize self-employment tax and FICA tax. Profits as a shareholder are not taxed.
3.Can have the protection of limited personal liability without having to pay corporate taxes.

Disadvantages:
1.Can be costly to set up and follow corporate formalities.
2.Numerous regulations and requirements must be upheld by an S Corporation, including a limit on the number of shareholders.
3.Close scrutiny by the IRS of shareholder-employees, who must receive reasonable compensation (subject to employment taxes) before any nonwage distributions may be made to that shareholder-employee.

C Corporation
Advantages:
1.Can offer employees incentive stock plans.
2.Easier to raise capital.
3.100 percent deductible health insurance is offered for all employees, as well as group term life insurance up to a specified amount per employee.

Disadvantages:
1.Takes more time and effort to maintain.
2.Costs more to start.
3.Double taxation. Besides paying corporate income taxes, any dividends to shareholders are taxed again at the applicable tax rate.

LLC
Advantages:
1.There is no need to meet the requirements and formalities of a corporation to maintain the business status.
2.One has greater flexibility than with a corporation in allocating income to members. For example, an LLC can have various classes of interest, while an S Corporation can issue only one type of stock.
3.LLCs provide personal liability protection for members.

Disadvantages:
1.Some states do not tax partnerships but do tax limited liability companies.
2.If more than 35% of losses can be allocated to nonmanagers, the limited liability company may lose its ability to use the cash method of accounting.
3.Conversion of an existing business to limited liability company status could result in tax recognition on appreciated assets.