Incorporating your business will add to the credibility and prestige of your business, as well as to protect its directors and owners from any personal liability.
What are the disadvantages of incorporating?
The income from corporations is taxed at both the individual and corporate levels, which means that corporations must pay taxes on the income of the individual’s dividends and the corporation’s total income, known as “double taxation.”
Corporations are required to maintain corporate records. It is imperative to diligently maintain corporate records to offer the business’s owners the limited liability benefits of a corporation. The corporation’s debt financing may require a personal guarantee by the owners, thus omitting the owners’ limited liability for the loan amount.
What are the advantages of incorporating?
What is a registered agent, and does my corporation need one?
The registered agent is the person or entity designated to accept state correspondence and legal documents on behalf of your business. The registered agent is also responsible for forwarding these documents to you in a timely manner.
Most states require corporations to maintain a registered agent. If your corporation is located in a the same state as your officers, one of the officers may act as the corporation’s registered agent. However, many corporations often use a professional registered agent to maintain privacy.
Is it necessary to use the services of a lawyer in order to incorporate?
It is not necessary to hire a lawyer to incorporate. You may prepare and file the paperwork yourself to incorporate, or you may select the professional services of an incorporation firm, such as ours. By selecting CCA to handle all of your incorporating requirements, you will only need to fill in the order form, and our experienced staff will take care of all the rest of the details.
Is it important where I incorporate?
A corporation is allowed to incorporate in any state it chooses, even if that state is not the state of the business’s particular office location. However, it is recommended for businesses to incorporate in their home state. Several considerations are involved in choosing the location, such as tax laws, the cost of incorporation, and the general laws of that state governing a corporation’s liabilities and actions.
What is a C corporation?
C corporation is a tax status your corporation may elect. Larger corporations often choose to be taxed as a C corporation because they can have unlimited shareholders and minimal ownership restrictions.
One disadvantage of filing as a C corporation is “double-taxation.” Businesses that elect a C corporation tax status are required to file taxes at the business level and on personal tax returns. However, shareholders will not have to pay self-employment taxes on any dividends they receive from the company. Also, if the corporation decides to retain its income for growth purposes, shareholders won’t have to pay taxes on dividends they would have received.
What is an S Corporation?
When incorporating, you can choose the S corporation, which is a taxation election. The popularity of the S corporation taxation status increased because of the Tax Reform Act of 1986. Small business owners often choose S corporations because many of the advantages of corporate structures, partnerships, and sole proprietorships are combined within this status.
S corporations are similar to the C corporations in their disadvantages and advantages. However, S corporations carry special tax provisions. In a standard C corporation, the federal government taxes profits at the corporate level. Then, as profits are distributed among the shareholders as dividends, the C corporation is again taxed on this income to the individual shareholder. When an S corporation status is selected, this corporation is not responsible for payment of any taxes on its profits; taxes are only paid when dividends are distributed to shareholders as personal income. Therefore, by selecting the S corporation status, business owners can bypass C corporation’s heavy “double-taxation.”
What is a close corporation?
A close corporation which is also defined as a closely held corporation is a corporation in which (1) the stock of the corporation is not to be traded on a public exchange (NYSE, NASDAQ, etc.); (2) the number of its shareholders must be designated and usually cannot go beyond 30, and (3) particular limitations may be put on the transferring of stock. Small businesses can benefit significantly by being a close corporation.
How many officers and directors must my corporation have?
Most states require a corporation to have one director, while other states require a corporation to obtain several officers (usually a President, Vice-President, Treasurer, and Secretary). Based on the state, the number of shareholders a corporation has will dictate its number of directors. Many states have a minimum requirement of three directors.
What papers or filings are necessary in order to incorporate?
Most states usually require filing the company’s Articles of Incorporation, the corporate filing fees, and all the initial franchise taxes. California Corporate Agents can assist you in the filing of all the paperwork necessary to incorporate.