Despite the extensive belief in the news media that the LLC's are the preferred form of business organization, I have seen so many people incorporating as a C corporation. Could please explain this anamoly?

Thanks...

Clearly there are some distinct advantages of incorporating as a 'C' Corporation and it really depends on your specific needs and the long term strategic objective of your business.

All the entities that is the regular 'C' Corporation or LLC's generally offer the same extent of Limited Liability protection, and in most cases when it comes to maximum exposure of the owners, it is limited to their original investment.

Most Tax Experts that favor a 'C' Corporation over the LLC's have cited the following advantages as follows;

1)Better fringe benefits
When fringe benefits are critical to the Owners, the 'C' Corporation is the best entity choice, as the owners of other entities are generally treated as self-employed individuals thereby limiting their access to tax-free fringe benefits.

2)Advantageous Corporate Tax Treatment
The Tax rate on corporate income is usually lower than the tax rate on personal income up to the first $75,000 in income. This allows the owners to plan salaries and bonuses to lower their overall tax rate.

Whereas in the case of the LLC's all the credits, section 179 deduction and net income pass through to the individual shareholders of the company. This could increase the overall taxable income of the taxpayer/shareholder particularly if there are other multiple sources of income, resulting in a higher tax rate. Thus for certain individuals this may be an overwhelming reason to be choose a 'C' Corporation entity.

In short, the 'C' Corporation is the best employee benefit provider, offers the best opportunity to accumulate capital and offers the most separation of the owners form the business.

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