W E A LT H A S A VAC AT ION
Unless your partnership is formed as an LLC or a corporation, the advantages and disadvantages are similar to those of a sole proprietorship.
3.3 Corporations There are generally two types of corporations: C corporations and S corporations. Larger businesses with multiple employees are often structured as C corporations; most smaller businesses choose to organize as S corporations. The main difference between the two is how taxes are paid. C corporations are taxed as independent entities, whereas the income of an S corporation “passes through” to the individual tax returns of its owners. A corporation is a separate legal entity. It is formed under state law. The corporation owns the business and all of its assets and properties. The shareholders own the corporation. The main advantage of incorporating is that shareholders are not liable for the business’s debts. Instead, the corporation is liable. This structure might be the right business type for your VRP if you want: • • • • • • • • •
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Venture capital for fi nancing Flexible profit-sharing among owners Company earnings to stay in your business so it can grow Flexibility to spread the VRP rental revenue between the corporation and shareholders for tax-planning purposes Flexibility to set salaries for employees/owners to minimize taxes. Flexibility to provide (through the corporation) substantial health and medical benefits and other benefits To be able to sell your VRP business with ease at some point in the future To provide an accountable plan for travel and entertainment of clients To be able to offer employees stock options
