What is a C Corporation?
The C-Corporations is a formal business structure well suited for medium to large size companies that wish to attract investors through the sale of stock. C-Corporations are subject to double taxation as profits are taxed at the corporate level and then again when distributions are paid to shareholders. Some corporate revenue can be sheltered from taxation by retaining profits as operating capital.
What is an S-Corporation?
The S-Corp is not an entity structure but rather a tax status election that allows for business owners to pay self-employment tax (Medicare and Social Security) on their salary income but not on remaining business profits taken as a distribution. A business that typically generates profits greater than the owner’s reasonable salaries may reduce tax burden with the S-Corp election.
How do I start a Corporation?
Forming a Corporation for your business requires several steps, including naming your Corporation, appointing a registered agent, appointing directors, issuing shares to initial investors, and filing articles of incorporation with the Secretary of State in the state in which you are forming your business.
How do I open a bank account for my Corporation?
Banks generally require authorized business owners to provide articles of incorporation and EIN (Tax ID) when opening an account for a Corporation.
How do I change ownership of my Corporation?
Generally, ownership of a corporation is determined by the sale or transfer of shares in accordance with the corporate bylaws and state regulations.
How do I terminate my Corporation?
Dissolving a corporation generally requires a formal agreement by the board of directors, file articles of dissolution, or equivalent documents required by the state in which you formed your business. It is best practice to resolve any outstanding financial obligations or compliance requirements including filing a final tax return for the corporation.
What are the compliance requirements for my Corporation?
Corporations must adhere to strict compliance requirements including holding annual shareholder meetings, recording share transfers, filing annual reports, and maintaining state and federal tax obligations.
What is the difference between a director and a shareholder?
Shareholders have equity in a company through stock ownership. Directors are generally shareholders who are elected to manage the corporation, elect corporate officers, and make high-level decisions that determine the company's direction.
What is the difference between a C-Corp and an S-Corp?
The C-Corporations is a formal business structure well suited to medium to large size companies that wish to raise capital through the sale of stock. The S-Corp is not an entity structure but rather a tax status election that allows for business owners to pay self-employment tax (Medicare and Social Security) on their salary income but not on remaining business profits taken as a distribution.
What is the difference between a Corp and a Sole Proprietorship?
The primary difference between a corporation and a sole proprietorship is liability protection for business owners. Operating as a sole proprietor means that the owner is personally liable for any debts, judgements, or damages incurred during the course of doing business. Generally, a corporation is a business entity that provides liability protection for owners.
Does my C-Corporation need to file Federal Taxes?
Yes. The IRS considers the C-Corporation as a taxable entity separate from its owners. C-Corporations report corporate income with IRS Form 1120. C-Corporations are subject to “double taxation” as profits are taxed first at the corporate level and then again when distributions are paid to shareholders.
Does my S-Corporation need to file Federal Taxes?
No. While the S-Corporation is not taxed at the corporate level, S-Corporations must report income to the IRS using Form 1120S. S-Corporations issue a Form K-1 to shareholders indicating their individual earnings which are then reported on the shareholders individual tax returns.
What are the advantages of a Corp vs. an LLC?
The C-Corporation is well suited to medium to large size companies that wish to raise significant capital through the sale of stock. C-Corporations are considered perpetual entities as shareholders are interchangeable. Generally, an LLC is automatically considered an at-will company which exists only until holdings are sold, members disassociate or agree to dissolve the company.
What are the advantages of an S-Corp vs. a C Corporation?
The S-Corp is not an entity structure but rather a tax status election that allows for business owners to pay self-employment tax (Medicare and Social Security) on their salary income but not on remaining business profits taken as a distribution. C-Corporations are subject to double taxation as profits are taxed at the corporate level and then again when distributions are paid to shareholders.
What is a Registered Agent?
A registered agent is an individual or a company assigned to receive service of process and other official mail on behalf of a business. Generally, registered agents must maintain a physical address and be available to receive service of process during normal business hours, Monday - Friday.
What is a Professional Corporation?
A Professional Corporation (PC) is a corporate entity that can be formed by licensed professionals, such as attorneys, architects, or CPAs. Regulations vary by state, but generally Professional Corporations provide personal asset protection for owners, similar to other corporations, while also providing protection against liability due to the negligence of an associate.
What is a Nonprofit Corporation?
A Nonprofit Corporation generally exists in order to perform some type of public service or social cause. Money generated through fund raising activities, grants, donations, retail sales or other business activities are used to further the qualified charitable goals of the organization rather than to generate profit for distribution to shareholders.
How do I start a Nonprofit Corporation?
Nonprofit filing requirements and fees vary by state. The most popular type of non-profit corporation is the 501(c)(3) public charity. A non-profit organization may qualify for federal income tax exemption under section 501(c)(3) if it is organized for any qualifying purpose. Apply for exempt status by completing IRS Form 1023 and submitting the application along with the appropriate fee. Application processing time can range from 2-8 months, and in some cases even longer.
Can my Corp have a DBA?
Yes. If you wish to do business with a different name than your Corporation, you may wish to register a doing business as (DBA) name. For example, ACE 123 LAWN, INC. doing business as "Ace 123 Lawn Care and Landscape". Generally, a DBA is registered with a state agency or county clerk in the county where you will be doing business.
What is an EIN?
An Employer Identification Number (EIN) commonly referred to as a Tax ID Number, is a unique number assigned by the IRS to identify a business entity. Whether operating as a sole-proprietor, LLC or a corporation, every new business should obtain an EIN.