LLC vs S-Corp vs C-Corp: Tax Differences Explained

[HRMB Associates]

LLC, S Corp, and C Corp are business structures that protect 
personal assets and manage income. Each of them has a distinctive 
purpose. LLC is a business structure that protects your assets 
and keeps your personal savings, home, and other assets safe even 
when you are in debt. An LLC is ideal for solo entrepreneurs, 
small businesses, and real estate investors seeking a simple, 
convenient tax structure.

An S Corp is a tax structure for businesses that do not pay tax 
directly. They would rather pass profits and losses through. For 
businesses seeking to reduce payroll taxes, an S Corp structure 
is the most suitable.

A C Corp business structure is separate from its owners and 
offers limited liability while allowing investors to hold 
unlimited ownership. These types of businesses pay double taxes- 
the corporation pays income tax on its profits, and the owners 
pay personal income tax on dividends. A business structure that 
can meet your long-term financial goals is considered the best 
one for taxes. It must give future profits and long-term growth.

Selecting a business structure can be confusing and people 
generally make mistakes in this, which lessens their profits. 
Choosing a business structure that doesn’t align with the 
business's income, growth plans, and profit and liability 
protection is a common mistake. Small businesses may mix personal 
and business expenses, which can blur business deductions, taxes, 
and income- this is another common mistake. It is advisable to 
maintain separate bank accounts for personal and business 
expenses.