We professionally form corporations, limited liability companies (LLCs), and non-profits. We help entrepreneurs and small business owners learn about incorporation and the benefits thereof.We help them undertake this important business step affordably and do so without sacrificing quality!
Below are brief summaries of the various types of incorporation procedures to help you decide which one is right for you.
The Limited Liability Company (LLC)
The limited liability company is a corporate entity which allows limited liability protection. It can be managed by the members or by managers.
The benefits of the LLC are the following:
- Allows for pass-through taxation
- More professional than a sole proprietorship
- Requires less annual paperwork
- Less formalities than a C corporation or an S corporation
- Generally have no ownership restrictions
- Flexibility in structuring the management of the company
The C Corporation
This is the “standard”, most common corporate structure, also known as a C corporation. It is a separate legal entity owned by shareholders. The shareholders cannot be held personally responsible for the debts of the corporation.
The advantages of the C corporation are as follows:
- C corporations may provide a number of income and tax savings
- A C corporation may result in self-employment tax savings
- C corporations are audited less frequently than sole proprietorships
- Ownership is easily transferrable through the sale of stock
- C corporations may have a virtually unlimited number of shareholders
- Shareholders are not personally responsible for the debt and liability of the business
- C corporations have unlimited life, extending beyond the illness or the death of its owners
- The creation of the C corporation involves the proper formation of documents, known mostly as the articles of incorporation or certificate of incorporation, which must be filed with the appropriate state agency and must be accompanied by the necessary state filing fees.
The S Corporation
The S corporation is a standard corporation that has elected a special tax status with the IRS. The formation requirements are the same as with the C corporation, wherein the creation of the corporation entails the filing of documents with the appropriate state agency and the necessary filing fees paid.
Advantages of the S corporation:
- S corporations avoid the possibility of double taxation on profits
- S corporations may provide a number of income and tax savings
- S corporations may result in self-employment tax savings
- Many S corporation business expenses may be tax-deductible
- Capital may be raised by selling shares of the S corporation’s stock
NOTE: These are, but a brief overview of the LLC, the S and the C corporations. These are by no means a description in its entirety or complexity. Please feel free to contact us to ask questions and/or to obtain additional info.
Not for Profit Corporations/501 (c)(3) Planning
A nonprofit corporation is formed for purposes other than making a profit. Nonprofit corporations are formed pursuant to different state laws than standard for-profit corporations; however, the process of forming a nonprofit is very similar.
To be considered tax-exempt, nonprofits must apply for federal and state tax-exempt status. This status is not automatically granted once the nonprofit corporation is formed. To apply for federal tax-exempt status, Form 1023 must be filed with the IRS. For state requirements, it is best to contact the department responsible for taxation in the state of formation.
Nonprofits also provide limited liability protection. The personal assets of the directors or officers typically cannot be used to satisfy the debts and liabilities of the nonprofit.
To qualify for federal tax-exempt status under 501(c)(3) of the Internal Revenue Code, the nonprofit must be organized and operate for some religious, educational, charitable, scientific, literary, testing for public safety, fostering of national or international amateur sports, or prevention of cruelty to animals or children purpose permitted under this section of the code.
Advantages of a nonprofit corporation:
- Directors are typically not personally responsible for the debts and liabilities of the nonprofit corporation
- Nonprofit corporations have the ability to apply for both federal and state tax-exempt status
- Certain nonprofit corporations are eligible to receive public and private grants, making the obtainment of operating capital easier
- With 501(c)(3) nonprofits, donations made by individuals to the nonprofit corporation are tax-deductible
In order to form a nonprofit corporation, nonprofit articles of incorporation or a nonprofit certificate of incorporation must be filed with the appropriate state agency and the necessary state filing fees paid. The formation documents must include certain clauses and information, such as a very detailed business purpose statement, in order for the entity to qualify for tax-exempt status. Thereafter, form 1023 must be filed with the IRS.
Contact us for further information and implementation of the 501 (c)(3) non-profit corporation filing.