Types of business structures

There are a few different varieties of corporations, but the most essential is the basic professional corporation or C corp:

Corporation (C corp) – An entirely separate legal entity that exists completely separate from its owner(s), a C corporation offers the absolute most protection of any business structure. Some main features are:

• Rigid structure: they require designated roles, such as a board of directors, that other (smaller) structures don’t.
• Stocks: corporations can sell stocks to raise funds.
• Formal reporting: they require significantly more formal record keeping and business procedures than other business structures.
• High cost: they’re more expensive to register.
• Double taxes: you pay corporate taxes separate from your own business income, as well as taxes on dividends.

S corporation (S corp) – An S corporation with certain restrictions that are not recognized in every state. It exists to avoid the double taxation described above. Some distinguishing features are:

• Tax benefit: where applicable, profits and losses “pass through” to personal tax forms (like a sole proprietorship, partnership, or LLC) instead of higher corporate tax rates.
• Shareholder restrictions: no more than 100 shareholders allowed, all of whom must be US citizens.

Benefit corporation (B corp) – This is another special kind of corporation that’s similar to a C corp except that it’s driven not just by profit, but also by a mission of public benefit. In addition to the rigorous documentation required of all corporations, B corps must file benefit reports in some states.

Close corporation – Unlike other corporations, a close corporation has much less formal structure, can be run without a board of directors, and can’t be traded publicly in some states.