Number of Owner |
One Owner |
Unlimited
|
100 |
Depend of the Management structure
|
Double Taxation |
|
|
|
|
Life terms |
Ends when owner dies
|
Unlimited life |
Unlimited life |
Possible, some restrictions apply
|
Management and operation |
Easy |
Must maintain corporate formalities |
Must maintain corporate formalities |
Easy, Depend of LLC Struture |
Pass-through taxation
|
|
|
|
|
Owner Liability |
|
Limited , Shareholders are Protected
|
Limited , Shareholders are Protected
|
|
Management |
By owner |
Board of Director elect the President
|
Board of Director elect the President
|
Members can elect the Company Structure |
Shareholder may be a Nonresident Alien
|
|
|
|
|
Getting Started…
Introduction…
Business start up – types of incorporation and company formation. When you start a business you need an experienced firm who can assist you properly with your company formation. Discover the advantage of corporations and which type of incorporation is right for your business start up.
Starting a business puts you in the driver's seat. There is no greater reward in life than being your own boss. Starting a business requires focus and careful planning. You must follow many steps of company formation before you can incorporate a business and begin opening the doors.
Before you start a business, you must learn the advantage of a corporation and decide which of the types of incorporation and business structure are most suitable for your company formation. The law requires several company formation formalities before it will recognize and incorporate your business. Further, these business start up formalities change depending on the type of company formation you are considering, as well as the jurisdiction you are considering filing in.
A Professional and Experienced Incorporation Firm is a necessity to incorporate a business correctly from the beginning. Only an experienced firm can ensure that your business structure is tailored to your needs of business formation. Executive Incorporation Services, is an experienced incorporation firm available to incorporate your business and set you on the road to success. We have the expertise to help anyone start and incorporate a business.
For business start up, types of incorporation and company formation, you need an experienced firm who can assist you with proper company formation to incorporate your business start up. Discover the advantage of a corporation and which type of incorporation is right for your business formation.
Is a Corporation or LLC right for my business?
There are many types of business entities, the simplest being sole proprietorship and general partnerships. While these may be easiest to form, they offer no personal liability protection and no significant tax advantages for their owners. Forming a Corporation or Limited Liability Company will protect your personal assets (homes, cars, investments, etc.) from any possible creditors; liabilities or lawsuits brought against the business. Incorporating will make your business more credible and attractive to customers and investors. In addition, these types of entities offer numerous tax advantages for owners and shareholders. We do suggest that the selection of a business entity be done with the assistance of a professional, such as your tax or legal advisor, as they may be more familiar with your specific needs.
What is a Corporation?
A corporation is a legal entity created through the laws of its state of incorporation. Individual states have the power to promulgate laws relating to the creation, organization and dissolution of corporations. Many states follow the Model Business Corporation Act. State corporation laws require articles of incorporation to document the corporation's creation and to provide provisions regarding the management of internal affairs. Most state corporation statutes also operate under the assumption that each corporation will adopt bylaws to define the rights and obligations of officers, persons and groups within its structure. States also have registration laws requiring corporations that incorporate in other states to request permission to do instate business.
There has also been a significant component of Federal corporations law since Congress passed the Securities Act of 1933, which regulates how corporate securities are issued and sold. Federal securities law also governs requirements of fiduciary conduct such as requiring corporations to make full disclosures to shareholders and investors.
The law treats a corporation as a legal "person" that has standing to sue and be sued, distinct from its stockholders. The legal independence of a corporation prevents shareholders from being personally liable for corporate debts. It also allows stockholders to sue the corporation through a derivative suit and makes ownership in the company (shares) easily transferable. The legal "person" status of corporations gives the business perpetual life; deaths of officials or stockholders do not alter the corporation's structure.
Corporations are taxable entities that fall under a different scheme from individuals. Although corporations have a "double tax" problem --both corporate profits and shareholder dividends are taxed -- corporate profits are taxed at a lower rate than rates for individuals.
C Corporation type is the most common structure in the business world. Click Here to file your C Corporation or Contact Us directly to discuss specific needs.
General Corporations (C Corporation)
The General or C Corporation is the most common legal entity and offers the greatest flexibility with respect to ownership and the free transferability of ownership interest. Although a C Corporation allows for many advantageous tax deductions and benefits, small business owners may be at a disadvantage due to the double taxation associated with a C Corporation. Income is first taxed at the corporate level at corporate tax rates. Then when the corporation issues dividends to its shareholders, the same money is taxed again at shareholder level. Still, larger businesses may benefit from forming as a C Corporation.
Advantage of forming a C Corporation:
- Limited liability protection
- Unlimited life
- Easy to raise capital
- Flexibility of ownership
- Allows issuance of classes of stock
- Free transferability of ownership
- Tax benefits allowing for certain health and life Insurance deductions
- Subject to governmental regulations
- Double taxation
- Must maintain corporate formalities
Subchapter S Corporations (S Corporation)
A Subchapter S Corporation or S Corporation is similar to the C Corporation and operates in the same manner. The main advantage associated with the S Corporation is that the income passes through the shareholders, thus avoiding the double taxation of a C Corporation. However, the corporation must meet certain requirements to qualify for the “S” status under the current IRS rules. It also loses some of the tax deductions allowed to C Corporations.
Starting an S Corporation is ideal for smaller businesses looking to take advantage of the special tax status and income flow that S Corporations offer. Discover the disadvantage and advantage of S Corporation for your business formation.
Advantage of forming an S corporation:
- Limited liability protection
- No “double taxation”
- Unlimited life.
- Must maintain corporate formalities
- No more than 100 Shareholders
- Limited ownership (individual, estates and certain trusts)
- Limited to one class of stock
- S Corporation income flows without the "double taxation" occurring in C Corporations
- There is a special status providing a tax advantage for S corporation.
Disadvantage of forming an S Corporation:
- Subject to governmental regulations
- Some tax deductions are lost as compared to the C Corp
- The S Corporation business is limited to no more than 100 shareholders.
- No S Corporation shareholder may be a nonresident alien
Limited Liability Company (LLC)
Limited Liability Company or LLC, are a relatively new development in the business market. This type of entity combines the limited liability protection of a corporation with the simplicity and tax advantages of a partnership and individually owned businesses. Many feel the LLC is most beneficial and perfect for businesses with a small number of owners, who intend to act as or are currently acting as a partnership with the need for personal liability protection or small business owners or investors looking to hold real estate or individuals looking for more control and flexibility in managing their business than that offered in corporations. Further, limited liability companies are not restricted from foreign owners or investors like s-corporations, which means they are perfect for receiving foreign investment. Increasing numbers of new businesses are now enjoying the benefits of forming as, or converting their existing partnership to a Limited Liability Company.
Advantage of forming an LLC:
- Limited liability protection
- No “double taxation”
- Simple structure and operation
- Less record keeping and formalities
- Easy conversion from existing Partnerships
Disadvantage of forming an LLC:
- Relative new entity that lacks uniform state law treatment
- Usually limited life (not perpetual existence)
- Restrictive transferability of ownership
- Possible dissolution upon death or resignation of an owner
Some advantages of a C Corporation vs. an LLC:
- Profits of a C Corporation are not subject to social security and Medicare taxes.
- Banks are more willing to loan money to a C Corporation than an LLC company.
- Form a C Corporation for greater fringe benefits than an LLC company.
- Although a C Corporation is subject to double taxation, there is greater tax flexibility.
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