Some different types of corporations include S corporations, C corporations and limited liability companies. Individuals who work in certain professions, such as attorneys, accountants and engineers, may also be able to incorporate as a professional corporation.
A limited liability company, or LLC, gives each individual member personal liability protection. Members report business expenses and income on their personal tax returns. If an LLC has only one member, they report their expenses and income on Schedule C of Form 1040 in the same manner as a sole proprietorship. LLC members are regarded as self-employed individuals but have the advantage of some liability protection for their personal assets and some tax deductions that are not available to sole proprietors or general partnerships.
S corporation status is similar in that members report income and expenses on their personal tax returns and have some liability protection. The main difference is that members are regarded as employees of the company rather than self-employed.
C corporation status creates a completely separate legal business entity. Shareholder assets are protected from claims by creditors. A C corporation must track income and expenses and pay taxes separately. Owners can be taxed twice on profits at both the corporate and personal level, however.