Starting a Corporation

Steps to form a corporation

  1. Brainstorm a few potential company names, then check if any of those names are available and if there are corresponding URLs for sale with those names.
  2. Choose the company name and the URL, then register the URL.
  3. Choose the state in which you want to register your business.
    1. Your location and business structure determine what you'll need to do to comply with state and federal requirements. Each state has its own set of rules for businesses seeking to form a corporation there. Speak to a CSC expert for more information.
  4. Choose the legal structure of your business, for example, a corporation, limited liability company (LLC), or other type of structure.
  5. Appoint a registered agent to handle your legal summons, also known as, service of process (SOP).
  6. Obtain an employer identification number (EIN).
  7. Open a bank account.
  8. Apply for the licenses you'll need to operate the business.

Types of business entities

A business entity is an independent construct that is formed and administered per corporate law to engage in business activities, charitable work, or other allowable activities. Most often, business entities are formed to sell a product or a service.

Limited liability companies (LLCs)

The most popular entity type for small businesses, an LLC is the entity of choice for many law, accounting, and finance firms because the benefits include:

  • Limited liability for business debts and obligations
  • Pass-through taxes and enhanced credibility
  • No residency requirement

Series LLC

Certain states allow companies to form a distinctive business structure called a Series LLC, taking its name from its allowance of multiple (a series of) members, managers, or business lines within it. Each series within the company can hold assets, have members, and pursue its own business objectives, all while enjoying protection from legal claims against other series within the company, without needing to form additional entities. Some other benefits of a Series LLC include:

  • Reduced cost because just one filing fee is required to form a series LLC, regardless of how many series it contains.
  • Asset protection by design; the assets of each series are safe from judgments against the others (bankruptcy could be an exception).
  • Versatility due to the variation in business purposes within it. This structure is often used to safeguard real estate or intangible assets.

Limited partnerships

This type of entity is also a popular choice for many law, accounting, and finance firms, as well as businesses that focus on time-restricted projects, such as real estate and film production. Other benefits include:

  • Personal asset protection up to the amount of the investment for the company's limited partners
  • Pass-through taxation that allows partners to report business profit and loss on their personal returns.
  • Full oversight between the partners with the potential to generate capital by adding more limited partners.

Sole proprietorships

This is an entity owned and operated by one person, without legal distinction between the owner and the entity. Some benefits of a sole proprietorship are:

  • Owner remains personally liable for lawsuits filed against the business.
  • No state filing required to form a sole proprietorship.
  • Easy to form and operate.
  • Owner reports business profit and loss on their personal tax return.

C corporations (C corps)

The most common type of corporation in the U.S. because of its unlimited growth potential through stock sales, C corp benefits include:

  • Limited liability for directors, officers, shareholders, and employees
  • Enhanced credibility and certain tax advantages
  • Unlimited growth through the sale of stock and perpetual existence

S corporations (S corps)

The lighter version of a C corp, S corps are not subject to double taxation of corporate income and shareholder dividends with this federal tax status. Other benefits include:

  • Limited liability for directors, officers, shareholders, and employees
  • Pass-through taxes and once-a-year tax filing requirement
  • Investment opportunities and perpetual existence

Professional corporations

The professional corporation (PC) and professional limited liability company (PLLC) are the formations of choice for many business owners who work in accounting, law, medicine, architecture, engineering, or related fields. The benefits include:

  • Personal asset protection from lawsuits brought against the practice
  • Malpractice protection from other owners within the company
  • PCs enjoy certain tax advantages similar to the C corp
  • PLLCs are taxed like LLCs, generally pass-through taxation for members

General partnerships

A general partnership allows two or more people to share in the assets and profits, as well as the financial and legal liabilities of a business. The partners' personal assets are liable to the partnership's obligations. Some benefits of a general partnership include:

  • An unlimited number of owners are allowed, and they need not be U.S. citizens or residents
  • Owners can report business profit and loss on their personal tax returns
  • Owners are also permitted to distribute special allocations, under certain guidelines
  • The business is not required to hold annual meetings or record meeting minutes

Nonprofit corporation

A nonprofit corporation provides liability protections and tax advantages to entities primarily based on education, science, religion, and charitable endeavors. Some additional benefits of a nonprofit include:

  • Limited liability protection for directors and officers, who are not personally liable for the organization's debts and liabilities
  • Perpetual existence, because the corporation continues even if a director leaves the business or passes away
  • Eligibility for certain public and private grants

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