Introduction
The corporate form has become the standard for many businesses in our complex
and litigious society. Before there were corporations, investors in a business
risked everything if the venture turned south. If the company lost money and
didn't have the cash to pay its creditors, the partners had to make up the
difference with their own money. With the advent of the corporation, investors
could be shielded from this type of liability, and as a consequence, more people
were willing to invest in business ventures.
Our law library provides you with general information relating to corporations.
We also outline their advantages, disadvantages, and how they compare to other
business entities, including the limited liability company (otherwise known as
an LLC). If you are considering forming a corporation, we urge you to carefully
read these sections before determining which business entity is best for you.
What is a corporation?
A corporation is a distinct legal entity created under state laws which can open
a bank account, purchase property, enter into contracts and operate a business.
One of the most important features of a corporation is that generally, its
owners are not personally responsible for debts of a corporation.
Who can form a corporation?
Anyone who completes the articles of incorporation and pays the state filing fee
can form a corporation. There is no age, residency or other legal requirement.
Do you need an attorney to form a corporation?
No, you do not need an attorney to form a corporation. You can prepare the legal
paperwork and file it yourself, or use a professional legal documentation
service. If you choose to form your corporation with Saletta.Com, you will only
need to answer a few simple questions on-line, and Saletta.Com will do the rest.
What are the main differences between a C corporation
and an S corporation?
C-corporations are subject to double taxation; that is, one tax at the corporate
level on the corporation's net income, and another tax to the shareholders when
the profits are distributed to them. S-corporations, on the other hand, have
only one level of taxation. All of their income is allocated to its
stockholders. However, C-corporations have greater tax planning flexibility and
can shield stockholders from direct tax liability. In addition, S-corporations
are subject to limitations, such as the number and type of stockholders it can
have.
What are the main differences between an LLC and an
S-corporation?
An LLC has more operating flexibility and less restrictions than a
S-corporation. For example, an S-corporation cannot have more than 75
stockholders and must hold an annual meeting of stockholders. On the other side
of the coin, employee-owners of an S corporation may pay less taxes overall than
employee-owners of an LLC.
What is the procedure for forming a corporation and
what legal documents are required?
In order to create a corporation, articles of incorporation need to be filed
with the Secretary of State. Next, bylaws and organizing resolutions are
adopted. A corporation will also needs to apply for a tax identification number
with the IRS.
Unlike many other incorporation services which only create and file the articles
of incorporation, Saletta.Com can prepare and complete all of these required
documents for you.
Can I be the only stockholder in my corporation?
Yes, a corporation can be formed with only one stockholder. However, corporate
formalities, such as director and shareholder meetings, are still required in
order to preserve the corporate form and prevent the stockholder from personal
liability.
How much will it cost to form and run a corporation?
There are three types of costs involved in forming and operating a corporation;
service fees, state filing fees and annual state fees and taxes. Saletta.Com can
prepare and file all of the required legal documentation and for as little as
$199 (plus state filing fees). Filing fees and taxes for Various States
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