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Types of Business Structures

Corporation Benefit Corporation Workers’ Cooperative Limited Liability Company (LLC)(L3C) General Partnership Sole Proprietor Non-Profit
Who are the owners? 1+ Shareholders* (owners) 1+ Shareholders* (owners), Board of directors is required 1+ Shareholders* (owners) 1+ members (owners) 2+ partners (owners) 1 owner No owners, governed by Board of Directors (minimum of 3 directors)
What are the governing documents? Bylaws* Bylaws* Bylaws* Operating Agreement* Partnership Agreement* Business plan recommended Bylaws*
What is the source of initial business funding? Sale of stock, retained profits* Sale of stock, retained profits* Sale of stock, retained profits* LLC member investments, retained profits* Partner investments, retained profits* Proprietor’s investment; retained profits* Grants, individual contributions/donations, fees for services
Who is liable? Shareholders* have limited liability* for debts of corporation Shareholders* have limited liability* for debts of corporation; Different rules for director liability Shareholders* have limited liability* for debts of corporation Members (owners) have limited liability* for debts of the LLC Unlimited personal liability for debts of the business including your partners’ actions Unlimited personal liability for debts of the business and yourself Directors/Employees are not personally liable for debts of the business
Who receives profits? C-Corp*: Subject to distributions to Shareholders*. S-Corp*: Shareholders in proportion to investment C-Corp*: Subject to distributions to Shareholders*. S-Corp*: Shareholders in proportion to investment. A portion of the profits are used for a general public benefit. C-Corp*: Subject to distributions to Shareholders*. S-Corp*: Shareholders in proportion to investment. Or as stated in bylaws LLC members in proportion to investment, or by agreement Partners in proportion to investment, or by agreement Proprietor Retained within the organization in furtherance of non profit purposes
What are the entity tax obligations in RI? C-Corp pays taxes on income, corporations are subject to the minimum corporate franchise tax of $400/year regardless of profit or loss, shareholders pay taxes on dividends C-Corp pays taxes on income, corporations are subject to the minimum corporate franchise tax of $400/year regardless of profit or loss, shareholders pay taxes on dividends C-Corp pays taxes on income, corporations are subject to the minimum corporate franchise tax of $400/year regardless of profit or loss, shareholders pay taxes on dividends Choose to be taxed as a partnership/sole proprietor - disregarded entity or a corporation for income, LLC’s are subject to the minimum corporate tax of $400/ year regardless of profit or loss Each partner reports and pays share of taxes on personal tax return Owner reports and pays taxes on personal tax return Tax exempt status granted after application to the US Internal Revenue Service.
Who pays income taxes on profit? C-Corp pays profits, shareholders pay individual capital gains rates on dividends; S Corp. stockholders pay individual rate on profit share and capital C-Corp pays profits, shareholders pay individual capital gains rates on dividends; S Corp. stockholders pay individual rate on profit share and capital C-Corp pays profits, shareholders pay individual capital gains rates on dividends; S Corp. stockholders pay individual rate on profit share and capital LLC members pay individual rate, or can elect to be taxed as a corporation Partners pay individual rate Proprietor pays individual rate After application and receipt of non-profit status from the IRS, tax exempt.
What are the Department of State entity filing obligations in RI? Complete an initial application for Articles of Incorporation, a filing fee of $230; one year after the initial filing you will need to submit an annual report yearly for $50 per year Complete an initial application for Articles of Incorporation, a filing fee of $230; one year after the initial filing you will need to submit an annual report yearly for $60 per year Complete an initial application for Articles of Incorporation, a filing fee of $230; one year after the initial filing you will need to submit an annual report yearly for $50 per year Complete an initial application for Articles of Organization, a filing fee of $150; one year after the initial filing you will need to submit an annual report yearly for $50 per year No registration necessary No registration necessary Complete an initial application for Articles of Incorporation, a filing fee of $35; one year after the initial filing you will need to submit an annual r eport yearly for $20 per year
  • *Bylaws - a rule or law established by an organization or community to regulate itself, as allowed or provided for by some higher authority.
  • *Operating Agreement - a key document used by LLCs because it outlines the business' financial and functional decisions including rules, regulations and provisions. The purpose of the document is to govern the internal operations of the business in a way that suits the specific needs of the business owners.
  • *Partnership Agreement – a written agreement between two or more individuals who join as partners to form and carry on a for-profit business.
  • *C-Corp - refers to any corporation that is taxed separately from its owners.
  • *S-Corp - is considered a closely held corporation that passes through profits and losses to the individual owners of the company. Income is taxable at the owners individual rate as opposed to the corporate rate.
  • *Shareholders – an individual, group, or organization that owns one or more shares in a company.
  • *Members – owners.
  • *Retained Profits - is the profit kept in the company rather than paid out to shareholder.
  • *Limited Liability – an individual personally being held liable to the extent of their investment into the business.
  • *Dividend – payment(s) made by a company to its shareholders.