If you have a corporation and need legal counsel or representation, or are thinking of starting one, Snook Law can provide all the services you will need including all the documentation necessary for incorporating your business, advising you on compliance matters, and making sure you follow all required formalities.
Corporations are separate legal entities, and can enter into legal contracts, buy and sell assets, own properties, pay its own taxes, borrow funds, and sue individuals or other companies. There are also numerous compliance, reporting, and tax issues that owners and shareholders need to know.
Types of Corporations:
There are 3 main types of corporate entities:
1) C corporation—this is the most common type. Profits are taxed on the owners individually while the corporation is taxes separately as a business entity
2) S corporation—this is for corporations of no more than 100 shareholders. Profits and losses are borne by the shareholders on their personal tax returns. The corporation is not taxed as a separate entity so that this is referred to as a pass-through tax entity.
3)Non-profit—no shares are issued in non-profits. These are generally educational, religious, or charitable organizations and is exempt from taxation. All funds are retained by the entity for its operations and expansion, although salaries can be paid.
Limited Liability Corporations (LLC)
There are differences between an LLC and a corporation in terms of ownership, taxation, liability exposure, management structure, and reporting or compliance requirements. An LLC is formed in much the same manner as a corporation though there are less management requirements for an LLC, and your company can provide in its operating agreement about how it will be managed. For instance, it can be member-managed where all LLC members participate in its operations, or be by management that limits shareholder functions and leave most decisions to the managers.
Advantages of Incorporating
1) Corporations serve several functions and can be for profit or non-profit. Many business owners favor a corporate structure since it is a distinct or separate entity and offers certain advantages:
2) A separate legal entity— protects the owners from being personally liable in case of an adverse outcome in a lawsuit.
3) Unlimited life span—the death of shareholders, officers or directors, or members of the board of directors do not affect the continuity of the corporation, and its operations can continue indefinitely until there is a change in its charter
4) Easy sale of stocks or shares—if a publicly held corporation, stocks or shares are easily transferrable or sold without consent from other shareholders
5) Management by professionals—ownership and management is split. Shareholders do not participate in the corporate operations but concentrate power in the board of directors and officers who can retain a professional management team to handle day-to-day operations
6)Easy source of capital—corporations raise capital by selling shares or issuing bonds
Disadvantages of a Corporation
1) Taxation—corporations are subject to double taxation from the corporate earnings and dividend payments to the shareholders
2)Record-keeping—you must follow corporate formalities and keep accurate documentation. There are annual reports and tax returns to file, and maintenance of other documents
3)Incorporating may be the type of business entity that is most favorable to you, but you will need the experience and knowledge of a corporate lawyer from Snook Law to advise you on which corporate structure is the best for you, and who can fully counsel you on corporate obligations and responsibilities.