If you are operating a business as a sole proprietorship, or as a partnership if there is more than one co-owner, you probably pay self-employment taxes (social security, etc.) on your entire share of the company’s profits. Corporations and Limited Liability Companies (LLC), on the other hand, are taxed differently.

A corporation pays its share of employment taxes and withholds certain required income and employment taxes from employees’ compensation. Corporations and their employees pay these taxes only on the reasonable salaries paid to employees, not on the total profits of the corporation.

Learn the differences between a Sub-S and a Sub-C corporation, and decide which is best for you.

If you have any doubts about whether you have adopted the best form for your business, or are starting a new business or subsidiary (or buying a business), have a planning meeting with your attorney and your accountant to evaluate what form of organization would be best for your enterprise.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.