Home  Articles Business Basics Incorporating a Business
|
Incorporating a Business |
|
|
Page 3 of 13 Choosing Right Corporate StructureChoosing the right corporate structure is one of the most difficult decisions to make when deciding whether or not to incorporate your business. There are five different ways to set up your corporate structure, all with their own advantages and disadvantages. Knowing more about the various types of corporations can help you figure out which one will be best for you and your business. If you are a small business you should know that not every corporation is appropriate for what you are looking for and knowing the advantages and disadvantages of each will help you to make your decision.
C Corporations include large publicly traded companies but in general it is simply a general business corporation under the C subsection of the IRS code. Legally, it is a separate entity and because of this they file their own taxes which are separate from the shareholders. Depending on how many shareholders you have, this may be a good option for you. This protects that shareholders from being sued individually, but requires more paperwork that the average small business owner may want to take on.
S Corporations are simpler as far as the taxes are concerned. The business itself files an informational return but the shareholders also report the income, or loss of income as personal income. That means that many of the normal tax credits or avoidance tax strategies are not going to be possible. There is a limit to the number of shareholder so that might hinder you in getting a higher amount of capital investment.
You also have the choice of having a Limited Liability Company (LLC). This corporation offers protection for personal assets of the shareholders that normal partnerships or sole proprietorships do not. Having an LLC is ideal for businesses that are just starting up, high tech companies that have a higher than normal risk rate, or venture capitalists. It is also more flexible when it comes to tax time. You can declare that the shareholders pay their taxes individually or as a whole corporation.
If you are a business that has no financial gain at all then you should consider the Non-Profit Corporation. This is a corporation usually formed by religious organizations, charitable organizations, or companies dealing with educational or literally purposes. Scientific organizations also fall into this category. There can be no political participation in this corporation.
Lastly there is the Professional Corporation. This is a group of licensed professionals usually doctors or lawyers that build a company around their practice. It is an excellent way to protect the individual assets of the people involved and allows them autonomy to be able to serve their clients without facing risk of bankruptcy as an individual.
Typically most companies fall into the LLC category because it is best for a smaller company and home based business. Many companies also start with an LLC until they become larger and have more shareholders. Incorporating any company is a big step and one that needs to be looked at carefully.
|
|
|
|
|
|
Delicious
Technorati
Digg
YahooMyWeb