Legal Question in Business Law in Arizona

Re: What is the difference between and LLC, PLC, and an S Corp

An LLC is a limited liability company, whereas a PLC is partnership limited liability company. LLCs give you limited liability but are taxed like partnerships where each member is taxed individually. An S corp is a corporation which has elected to be taxed under Subchapter S of the Internal Revenue Code, so that the corporation does not pay taxes as an entity, so long as it distributes 90% of the profits to the shareholders. Certain qualifications must be met to elect S corp treatment. Regardless of which form of entity you use, you must be certain to observe the formalities of that legal entity, and operate as such, or you will lose the protection of limited liability and may lose the tax benefits.

The different entities have different tax rules and that will usually be the guiding force when deciding which entity to form.

Re: What is the difference between and LLC, PLC, and an S Corp

THE LAW OFFICES OF

DONALD W. HUDSPETH, P.C.

A PROFESSIONAL CORPORATION

�The Business of our Firm is Business�

An LLC is a Limited Liability Company, which is a hybrid between a partnership and a corporation. Instead of having officers, directors or shareholders as there are in a corporation, an LLC instead has managers and members, with an Operating Agreement governing the members� and managers� rights and responsibilities as well as the LLC�s operations. An LLC limits the liability of its members to their contribution -- whether it be cash, equipment or labor -- to the LLC. Depending on your choice, it can be taxed as a sole proprietorship, partnership or corporation. It can have flow-through taxation like an �S� corporation, if you choose.

A PLC or PLLC is a Professional Limited Liability Company. A PLC is an LLC for professionals only, i.e., members must be all doctors, all lawyers, or all accountants, etc. State regulatory agencies sometimes place extra limitations on PLCs, so you need to examine this choice carefully.

An "S" corporation is a "C" corporation that has elected with the IRS to have flow-through taxation, but an �S� election places some limits, such as the number shareholders there may be, etc. You might also elect to be a Professional Corporation. The Bylaws of the corporation govern the officers, directors and the way the corporation is run.

Deciding which entity to choose is actually much more complex than this (especially the tax aspect), and the only way we can really advise you as to which entity is right for your profession, personalities and for tax purposes is for you to sit down with one of our attorneys and discuss your specific needs. For that reason we include in our flat fee for entity formation an hour of time with our principal attorney to answer all your questions before you decide which entity is right for you.

Please feel free to contact us if you have any questions.

Law Offices of Donald W. Hudspeth, P.C.

3030 N. Central Avenue, Suite 604

Phoenix, AZ 85012

[email protected]

tele. 602.265.7997

fax 602.265.6099