| Incorporating a business means separating the | | | | consideration and even expert advice before starting. |
| business entity from the owner. A legal entity separate | | | | In order to qualify for S corporation status, the |
| from its owner and authorized to have much number | | | | corporation must be a U.S. corporation with not more |
| of shareholders is called a corporation. It is a form of | | | | than 75 of shareholders. It can have only one class of |
| business in which the owner has limited liability and the | | | | stock. The shareholders must be individuals, estates or |
| business entity has unlimited life, extending it beyond | | | | certain qualified trusts, who consent in writing to the S |
| the life of the owner. Unlike sole proprietorship and | | | | corporation election. The shareholders can not be |
| partnership it protects the owner from having his | | | | non-resident aliens. |
| private properties at risk if anything goes wrong with | | | | The exact papers needed to be files to form a |
| the business. | | | | corporation depend on the laws of the state of |
| There are three incorporation options available for a | | | | incorporation. But the most common and demanded |
| business owner: | | | | paper is the Article of Incorporation. |
| (a) C - corporation: | | | | (1) Article of Incorporation: |
| A regular corporation or C-corporation facilitates limited | | | | The Article of Incorporation state the primary rules that |
| personal liability to the owner and he doesn't use his | | | | governs the management of a corporation .A |
| personal income tax return to pay tax on the profit | | | | corporation becomes active on the date that the |
| from the corporation. Rather the corporation itself pays | | | | applicable governmental office in the state of |
| out the cash to the government at the lower rate than | | | | incorporation accepts the Article for filing. Filing an |
| what the owners of other forms of businesses pay. | | | | Article of Corporation may cost between USD 80 to |
| Setting up a corporation means a fair amount of paper | | | | 800. |
| work. Lots of legal formalities are to be rendered | | | | (2) Proof of working officers: |
| before starting a corporation. | | | | Proof to show that the company is run by officers |
| (b) LLC- Limited Liability Company: | | | | having positions of President, Vice-President and |
| Like corporations, LLCs facilitate limited liabilities to the | | | | Secretary, is required. |
| owners but as far as tax payment is concerned, LLCs | | | | (3) Fictitious Business Name Statement: |
| are more like partnership firms as owners report | | | | Fictitious Business name statement is required to be |
| business income on their personal tax returns. This | | | | files. This is also known as DBA which is a short form |
| type of business arrangement does not require as | | | | of "Doing Business As". The governments rule to file |
| much legal formalities as other forms of business | | | | DBA is based on the reason that in case of any |
| require. This is a reason why it can be a good choice | | | | dispute, legal problems it is easy to keep track of |
| for a new business. | | | | companies by the government authorities. But it also |
| (c) S-Corporation: | | | | helps to have other licenses and permits like opening a |
| An S corporation is a corporation that has elected a | | | | business checking account. This is to be filed to the |
| special tax status with the IRS (Internal Revenue | | | | county clerk of the county where the incorporation is |
| Services). This tax treatment allows the income of the | | | | to be started. |
| corporation to be treated like the income of a | | | | It is wise to have a registered agent who provides a |
| partnership or sole proprietorship; the income is | | | | registered address for the receipt of legal papers. A |
| transferred to the shareholders. Thus, shareholder's | | | | registered agent also serves as a local contact for the |
| individual tax returns report the income or loss | | | | Secretary of State and other government agencies. |
| generated by an S corporation. Like an LLC, an | | | | The registered agent receives notice of any suits, tax |
| S-corporation provides all the limited liability of a regular | | | | notices, etc. and then forwards them to the |
| corporation, while the owners are also taxed for | | | | corporation. However one can become his own |
| business income. But unlike an LLC, S-corporations | | | | registered agent as long as his address is within the |
| must first be regular corporations before applying for | | | | state in which the incorporation is to be established. |
| this unique tax-paying status--and continue following all | | | | Additionally, there are various sites which help |
| other corporate regulations. All of this indicates that an | | | | incorporating online without having an attorney. |
| S-Corporation business structure requires careful | | | | |