Understanding Different Kinds of Corporations

Knowing the various corporations is essential for determining the form your business needs to take. The most basic choices are the C-Corporation and the S-Corporation. Both these corporations have various benefits and their own tax schemes, so determining which is right for your business becomes a priority.

Generally, incorporation provides personal liability protection. This means that your personal assets are separated from your business liabilities. Corporations are recognized in all 50 states and internationally, although the regulations differ from region to region.

C-Corporation: Suitable for Growth and Flexibility

A C-Corporation is a great structure for businesses with growth potential. If you are scaling, hiring employees, or planning to go public, a C-Corp is your best bet. There is no limit on the number of shareholders; this model gives you great flexibility.

Key Features:

• It provides a separate legal entity that gives limited liability protection for owners.
• It is subject to corporate income tax and "double taxation" on dividends, meaning it is taxed at both the corporate and individual levels.
• Ideal for large-scale businesses or those wanting to go public.
• Owners can deduct employee healthcare premiums as a business expense.

Tax Considerations: C-Corps pay corporate taxes on profits, and owners are taxed on dividends received, leading to double taxation.

S-Corporation: Perfect for Small Businesses

An S-Corporation is more appropriate for small businesses in avoiding double taxation while maintaining protection of personal assets. It resembles an LLC by allowing business income to pass directly to the owners' tax returns.

Key Features:

• It provides protection of personal assets, similar to an LLC.
• Profits and losses are passed through to owners' personal tax returns, thereby eliminating double taxation.
• Shareholders cannot exceed 100; all shareholders must be U.S. citizens or resident aliens.
• Owners can pay themselves a salary and receive dividends, which could be taxed at a lower rate.

Tax Considerations: Owners report business profits and losses on their individual tax returns, avoiding corporate income tax.

Choosing the Right Online Service to Form Your Corporation

Forming a corporation has never been easier through online business formation services. The platform makes the filing of your corporate documents and acquiring business licenses an easy, affordable process to keep you on track legally.

Online formation services save you from all the paperwork and taxation issues with regard to registration, allowing you to make the most of the professionals involved. This is how it works:

• Select a service that will best suit your needs to form an LLC, S-Corp, or C-Corp.
• Choose your state of incorporation and business name.
• Pick the right package according to your requirements.

Why Do You Incorporate Your Business?

Incorporating your business offers a wide range of benefits. These include:

• Protection of personal assets compared to other structures like partnerships or sole proprietorships.
• Perpetual existence, ensuring continuity even after the death or departure of shareholders.
• Higher credibility with clients, banks, and investors.
• Easier access to loans due to a more structured management system.
• Defined management with a board of directors and shareholders, streamlining decision-making.

Domestic vs. Foreign LLC: What's the Difference?

A Domestic LLC is formed in the state where you live and primarily conduct business. This is the cheapest and most uncomplicated option for most entrepreneurs.

A Foreign LLC applies when you register your LLC in one state but operate in another. You will be considered a foreign LLC in the state where you conduct business, often incurring additional fees and filings.

Additional Services You May Require for Your LLC or Corporation

Most states require you to have a registered agent who will take care of your business's legal documents. Professional services ensure timely and proper handling of these documents. Depending on your industry, your business might need specific licenses or permits. Professional formation services can guide you through acquiring the right documentation.

Businesses must submit a Beneficial Ownership Information Report (BOIR) to FinCEN, detailing key individuals and beneficial owners. Many business formation services can assist in this new requirement.

Rush Filing and Same-Day Services

Many formation services offer expedited services to quickly file for an LLC or corporation. For example, ZenBusiness offers a Pro package for $199 plus state fees, including expedited processing. Expedited filing allows your business to launch without delay.