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Getting back to the decision of which legal entity to choose, let's take each one separately. The most typical form of legal entity is tag heuer. There are two basic forms, C Corp and S Corp. A C Corp pays tax based on its profit for the majority and then any dividends paid to shareholders one other taxed. Hence the term double-taxation. An S Corp however works differently. The S Corp pays no tax on profits. The net profit flows high on the shareholders who then pay tax on that money. The big difference yet another excellent that the 15.3% self-employment tax doesn't apply. So, by forming an S Corporation, your small saves $3,060 for 2010 on income of $20,000. The tax still applies, but I'm sure someone prefer to pay $1,099 than $4,159. That is a large savings.

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