Incorporating Local Lumber: Which Type of Corporation is Best for Flexibility?

What type of corporation would work best for Local Lumber?

Local Lumber, a small lumber company, decides to incorporate. It wants to have greater flexibility than traditional corporations. What type of corporation would work best for this company?

Final answer:

For a small lumber company like Local Lumber, an S Corporation or a Limited Liability Corporation (LLC) might be the best fit. These corporate structures provide more flexibility, offer pass-through taxation, and protect owners from personal liability.

If Local Lumber wants greater flexibility and reduced personal risk during incorporation, the most suitable type of corporation for this small business would likely be an S Corporation or possibly a LLC (Limited Liability Corporation). Both these corporation types are designed to offer benefits to small businesses that traditional corporations don't offer, including pass-through taxation and a more relaxed managerial structure.

An S Corporation lets profits, and some losses, be transferred directly to the owners' personal income without having to pay corporate tax rates. S Corporations can only have up to 100 shareholders, all of whom must be U.S. citizens or residents.

A LLC (Limited Liability Corporation) combines elements of partnerships and corporations. Owners of an LLC are considered members, and the company can be managed by these members or by appointed managers. It also offers some flexibilities such as limited liability and the benefit of pass-through taxation, similar to an S Corporation.