Corporation

We can help you incorporate your business

A corporation is a legal entity that is separate and distinct from its owners (known as shareholders). It is created under state or federal law and has rights and responsibilities similar to those of an individual. A corporation can enter into contracts, own assets, sue or be sued, and pay taxes.

Why Do You Need a Corporation?

  1. Limited Liability Protection:
    • Shareholders’ personal assets are protected from the corporation’s debts or legal liabilities.
    • This means creditors cannot pursue personal assets like houses or savings accounts to settle business debts.
  2. Credibility and Professionalism:
    • Operating as a corporation enhances your business’s reputation.
    • Larger clients, investors, and partners are more likely to work with a formal corporate structure.
  3. Ease of Raising Capital:
    • Corporations can issue stock, making it easier to raise funds from investors.
    • Attract venture capital and secure large loans.
  4. Tax Benefits:
    • Corporations may qualify for deductions that sole proprietorships or partnerships cannot.
    • Owners may also reduce self-employment taxes by taking a salary instead of pass-through income.
  5. Perpetual Existence:
    • A corporation can continue to exist independently of its owners.
    • Ownership can be transferred through the sale of stock.

How to Open a Corporation

  1. Choose a Name:
    • Select a unique name that complies with your state’s naming rules.
    • Check the availability of the name with your Secretary of State.
  2. Choose the State of Incorporation:
    • Incorporate in your home state or choose states like Delaware or Nevada, which offer business-friendly laws.
  3. File Articles of Incorporation:
    • Submit a formal document to your state’s Secretary of State.
    • This document includes the corporation’s name, address, purpose, and details about stock issuance.
  4. Appoint a Registered Agent:
    • Designate an individual or entity to receive legal documents on behalf of the corporation.
  5. Create Corporate Bylaws:
    • Draft rules governing the corporation’s operations, such as decision-making processes, meetings, and roles of directors.
  6. Hold an Initial Board Meeting:
    • Elect directors, issue shares, and adopt bylaws.
  7. Obtain Necessary Permits and Licenses:
    • Ensure compliance with state and federal regulations.
  8. Get an EIN (Employer Identification Number):
    • Apply through the IRS to use for tax purposes.

Benefits of a Corporation

  1. Separate Legal Entity:
    • Distinguishes the business’s activities from personal affairs.
  2. Ownership Flexibility:
    • Shares of stock can be transferred or sold.
    • Attracts investors through stock options or equity.
  3. Tax Planning Opportunities:
    • Allows business income to be taxed at a lower corporate rate.
    • Possibility of retaining earnings within the corporation to defer taxes.
  4. Access to Capital:
    • Corporations can issue various types of stock to raise funds.
  5. Employee Benefits:
    • Ability to offer tax-deductible fringe benefits like health insurance and retirement plans.
  6. Longevity:
    • Survives changes in ownership, unlike sole proprietorships or partnerships.
  7. Credibility:
    • Adds professionalism and legitimacy to your business operations.

Types of Corporations

  1. C Corporation:
    • Standard corporation taxed separately from its owners.
    • Offers unlimited growth potential through stock sales.
  2. S Corporation:
    • Similar to a C Corporation but allows profits and losses to pass through to shareholders’ personal tax returns.
  3. Nonprofit Corporation:
    • Formed for charitable, educational, or religious purposes and may be exempt from taxes.
  4. Professional Corporation (PC):
    • Designed for licensed professionals like doctors or lawyers.

Is a Corporation Right for You?

A corporation is ideal for businesses that:

  • Need significant liability protection.
  • Plan to raise capital from investors.
  • Aim for long-term growth and continuity.

For smaller businesses or those seeking simpler structures, consider alternatives like LLCs (Limited Liability Companies) or sole proprietorships.