Corporation: Perhaps the best known type of entity, a Corporation can offer tax advantages to certain companies as well as liability protection. Most Corporations are set up as a “C” Corporation or an “S” Corporation. A C-Corporation enables the entity to retain earnings at an initially lower tax bracket of 15% on the first $50,000.00 of income which may be an benefit to an entity which is looking to expand its business. However, when dividends are distributed to the shareholders, the shareholders must pay tax on such dividends thereby creating a “double-taxation”: the entity is taxed at the corporate level first then the shareholders are taxed at their tax rates. An S-Corporation avoids the double taxation issue by passing all income (and losses) generated to the shareholders each year. A Corporation must file a separate tax return each year and must comply with corporate formalities (meetings by directors and shareholders, filing of annual reports) to insure limited liability to the shareholders. A benefit to a corporation is that the dividends paid to the shareholders are generally not subject to self-employment taxes.