| When you are setting up a Company one of the most | | | | disadvantage to a C Corp is that if you distribute the |
| important things you can do is determine if you need | | | | profits to shareholders through dividends, those are |
| to incorporate. If you are new in the business world | | | | also taxed and you are in essence paying taxes twice |
| then you should talk to two professional before you | | | | on the same money. |
| make a decision. First talk to your bookkeeper or CPA | | | | Sub S Corp: This is a classification for a company that |
| (Certified Public Accountant) they will be able to take | | | | either wants no shareholders or wants no more than |
| your business plan and determine which type of | | | | 100 shareholders. Taxes are also done differently, they |
| corporation will give you the best tax advantages, | | | | are done on what is called a "pass-though" tax. This |
| select the wrong one and you could end up paying | | | | means that profits the company makes are not taxed |
| unnecessary taxes. | | | | on a corporate level, it is "passed-thorough to the |
| Then you need to find legal counsel to help do the | | | | owners of the S Corp. So the profit is equal divided |
| paper work for the type of corporation that you have | | | | between the officers or shareholders and added to |
| decided on. This paper work includes the all state | | | | their personal tax return. This is great unless you get to |
| required forms to register legally and properly. Most | | | | the point where your tax returns are pushing you |
| legal counsel will also fill out your Employers | | | | towards the Alternative Minimum Tax (AMT) bracket; |
| Identification Number (EIN) with the federal government. | | | | make sure you that you are advised on how this can |
| It is very important that you use legal counsel because | | | | affect your taxes. |
| any error in the paper work could delay your being | | | | LLC: An LLC (Limited Liability Corporations) are a |
| open for business because you cannot ever open a | | | | combination of both a C Corp and an S Corp. It has |
| bank account without this paper work. | | | | the structure protection of incorporating without the |
| Here is the important information that you should know | | | | restrictions placed on an S Corp. Many overseas |
| about each type corporations and pros and cons for | | | | investors find that this type of corporation is the best |
| each: | | | | way to go. The taxes are done on a "pass-through" |
| C Corps: This is for a large company that is going to | | | | basis also. |
| have a lot of shareholders involved in the corporation. | | | | The one thing that all these corporations have in |
| C corps are more expensive to start up and require | | | | common is you are setting up a separate legal identity |
| lots of additional legal advice because of the increased | | | | for your company, which will protect you and your |
| regulation generated by both federal and state | | | | personal assets from business debts so if your |
| government. | | | | company has financial problems they will not affect |
| The main difference with a C Corp versus other | | | | your personal finances. No matter which one you |
| corporation is that the profits of the company are | | | | choose you should always consult expert help in |
| taxed at a corporate level, which is substantially lower | | | | determining which type of corporation will work best |
| than the personal tax codes. The biggest | | | | for your needs. |