The main difference is how they are taxed by IRS.
- C-Corp – profit and loss stay in the company and it files its own tax return. It pays 21% flat tax on PROFIT – not earnings.
- Sub – S – Corp the profit and losses flow through to shareholder – proportionate to ownership and they claim it on their personal tax return
- LLC – in the eyes of the IRS is a “disregarded entity” a flow through – meaning the profits and losses flow through to the members and they claim it on their personal tax return. However LLC ownership percentage does not have to be the flow through percentage. An LLC can be taxed as a chapter C corporation or as an S-Corp as well.
Always check with your CPA to determine which tax structure is best for your situation.