What is a corporation?

A corporation is a legal entity that can exist separately from its owners. Creation of a corporation occurs when properly completed articles of incorporation (called a charter or certificate of incorporation in some states) are filed with the proper state authority, and all fees are paid.

What paperwork is required to incorporate?

Articles of incorporation conforming to state law must be prepared and filed with the proper state authorities and filing fees, initial franchise taxes, and other initial fees must be paid.

If you incorporate through Business Filings Incorporated, all you need to do is complete the online order form, and Business Filings prepares and files your articles of incorporation. Additionally, the price you pay includes all filing fees. It’s simple, just fill out the order form to get started.

Do I need an attorney to incorporate?

No, an attorney is not a legal requirement to incorporate. You can prepare and file the articles of incorporation yourself; however, you should understand the requirements of your intended state of formation.

You can use our service to incorporate and save money on attorney fees. However, if you are unsure if incorporation will benefit your business, consult an attorney or accountant.

What should I name my corporation?

Choose the name of your corporation carefully. It is very important that you portray the image you want for your new corporation. Legally, the name you select must not be "deceptively similar" to any existing corporation or must be "distinguishable on the record" of your state. For example, if a corporation named Flower Corp. exists in your state, you probably would not be allowed to name your business Flour, Inc. It is possible that the name you select will not be available; therefore, we ask for a second choice on the incorporation order form.

Additionally, the name you choose must show your business is incorporated. Most states require that the corporate name be followed by some type of indicator, such as Corporation, Incorporated, or an abbreviation.

What are the advantages of incorporation?

One of the primary advantages of incorporation is the limited liability the corporate entity affords its shareholders. Typically, shareholders and directors are not liable for the debts and obligations of the corporation; thus, creditors will not come knocking at the door of a shareholder or director to pay debts of the corporation. In a partnership or sole proprietorship the owner's personal assets may be used to pay debts of the business. Maintaining the limited liability of a corporation requires that the shareholders and directors follow all the rules of governance, including holding annual meetings and maintaining meeting minutes, which is why we offer corporate forms disks and corporate kits as part of our complete incorporation package.

Other advantages:

What are the disadvantages of incorporation?

The primary disadvantage to a corporation is double taxation. Profits of a corporation are taxed twice when the profits are distributed to shareholders as dividends. They are taxed first as income to the corporation, then as income to the shareholder. All reasonable business expenses such as salaries are deductions against corporate income and can minimize the double tax. Further, the double tax can be eliminated by making an S corporation election.

Other disadvantages:

What is an S corporation?

Standard business corporations or C corporations are required to pay income tax on taxable income generated by the corporation. Making a subchapter S election by completing and filing federal Form 2553 with the IRS is a way to avoid having your corporation treated as a separately taxable entity.

An S corporation is a standard business corporation that has elected a special tax status with the IRS. This tax treatment allows the corporation not to be a separately taxable entity. Instead, the income of the corporation is treated like the income of a partnership or sole proprietorship; the income is "passed-through" to the shareholders. Thus, shareholder's individual tax returns report the income or loss generated by an S corporation.

To be classified as an S corporation, a corporation must make a timely filing of Form 2553 to the IRS. This election must be made by March 15 if the corporation is a calendar year taxpayer, in order for the election to take effect for the current tax year. A corporation may later decide to elect S corporation status, but this decision would not take effect until the following year.

In order to qualify for S corporation status, the S corporation can have no more than 75 shareholders and must make the election to be an S corporation . The shareholders cannot be non-resident aliens. Also, an S corporation cannot issue preferred shares of stock with special liquidation, dividend, or conversion rights. To compare the S corporation to the C corporation and limited liability company, view our comparison page.

What is the organizational structure of a corporation?

The organizational structure of a corporation relies on three basic groups: shareholders, directors, and officers.

A corporation is owned by shareholders; however, they do not directly manage the corporation. Instead, they influence corporate decisions through indirect methods such as electing and removing directors, approving or disapproving amendments to the articles of incorporation and voting on major corporate issues.

The directors, who comprise the "board of directors," are responsible for managing the affairs of the corporation. Usually, directors make only the major business decisions and supervise and appoint the officers who make the day-to-day business decisions of the corporation.

Officers are responsible for the everyday management of the corporation. Typically, officers are appointed directly by the board of directors.

It is important to note that a shareholder may serve on the board of directors and as an officer. In fact, in most states one person is enough to form a corporation.

How many directors do I need to form a corporation?

Only one director is required in most states although you can elect to have more. Some states use the number of shareholders in the corporation to determine the minimum number of directors. If the number of shareholders is three or more, then the corporation must have three directors. If the corporation has less than three shareholders, then the number of directors may equal the number of shareholders.

Where should I incorporate my business?

One of the first decisions a business must make after deciding to incorporate involves selecting the proper state of incorporation. A corporation is not required to incorporate in the state of its operations; however, often the best decision may be to incorporate in your home state.

Two issues must be weighed to determine the proper state: (1) a dollars and cents analysis comparing the costs of incorporating in the state of operation versus qualifying to do business as a foreign corporation in the state under consideration and (2) determining the advantages and disadvantages of each state's corporate laws and tax structure. The decision usually falls between the state in which the business is located or Delaware.

If the corporation is a closely held corporation and does business primarily within a single state, local incorporation is often preferable. The cost of local incorporation will usually be less than incorporating in another state and qualifying to do business as a foreign corporation in the state. A foreign corporation that qualifies to do business in another state is subject to taxes and annual report fees from both the state of incorporation and the qualifying state. Another disadvantage of incorporating outside of your home state is the possibility of having to defend a law suit in another state.

For advice regarding which state is optimal for your particular business situation, consult an attorney or an accountant.

During the life of your business, if you find that your company needs to foreign qualify to transact business in another state, Business Filings can assist with this process. To learn about Business Filings' foreign qualification service, click here.

What is a publication requirement?

A few states require notice to be published in a newspaper that a corporation or LLC has been formed. States with this requirement include: Pennsylvania (corps only), Georgia (corps only), Arizona (corps and LLCs), Nebraska (corps and LLCs), and New York (LLCs only). The filing performed by Business Filings completes the publication requirement for each of the states except for New York LLCs.

How do I get started with the incorporation process?

If you choose to incorporate, articles of incorporation must be filed with that state and initial fees must be paid. Business Filings will complete these administrative tasks quickly and effectively.

After your articles are filed, your corporation must hold an organizational meeting where bylaws are adopted and the incorporation process is completed. Share certificates should be distributed to shareholders and these transactions should be recorded on the corporation's stock ledger. All of this information should be kept in a corporate record book.

Business Filings' corporate kit includes all of the information and paperwork needed to make this process easier.

What is a limited liability company?

The limited liability company or LLC is not a partnership or a corporation. An LLC is a distinct type of business that offers an alternative to partnerships and corporations, by combining the corporate advantages of limited liability with the partnership advantage of pass-through taxation.

What paperwork is required to form an LLC?

Articles of organization must be prepared and filed with the state and filing fees, initial franchise taxes, and other initial fees must be paid.

If your LLC is formed through Business Filings Incorporated, all you need to do is complete our simple order form. We will prepare and file your articles of organization and pay the initial filing fees.

Do I need an attorney to form an LLC?

No, an attorney is not a legal requirement. You can prepare and file the articles of organization yourself; however, you should understand the requirements of your intended state of formation.

You can use our service to form your LLC and save money on attorney's fees. However, if you are unsure of what entity type would be most beneficial to your business, consult an attorney or accountant.

What should I name my LLC?

Choose the name of your LLC carefully. It is very important that your name portray the image you want for your new company. Legally, the name you select must not be "deceptively similar" to any existing company or must be "distinguishable on the record" of your state.

For example, if an LLC named Flower LLC exists in your state, you probably would not be allowed to name your business Flour Limited Liability Company. It is possible that the name you select will not be available; therefore, we ask for a second choice on the LLC order form.

Additionally, most states require that the name you select show your business is a limited liability company, by including the words "Limited Liability Company," or the abbreviation LLC.

How many people are needed to form an LLC?

The IRS does allow one member LLCs to qualify for pass-through tax treatment; however, taxation of one person LLCs at the state level may be different.

How is an LLC taxed?

A state-registered LLC can be taxed for federal income tax purposes as a partnership. Under the check-the-box rules, an LLC can elect partnership status to avoid taxation at the entity level as an "association taxed as a corporation." If an LLC is not taxed as a partnership, it will be taxed at the entity level similar to a standard or C corporation.

The state income tax treatment of LLC profits and losses may or may not mirror the IRS tax treatment depending on the state. For specific information on your state rules visit your state's web site. The web address can be found on our detailed state information page.

Please note that California LLCs are subject to an annual minimum franchise tax of $800 per year. The first payment must be made within 3 months of forming your LLC. The state of California does send a bill to help you to remember to make this payment.

What is the organizational structure of an LLC?

An LLC is owned by its members. They are analogous to partners in a partnership or shareholders in a corporation, depending on how the LLC is managed. A member will more closely resemble shareholders if the LLC utilizes a manager or managers, because then the members will not participate in management. If the LLC does not utilize managers, then the members will closely resemble partners because they will have a direct say in the decision making of the company.

A member's ownership of an LLC is represented by their "interests," just as partners have "interest" in a partnership and shareholders have stock in a corporation.

How is an LLC managed?

An LLC may be managed by its members (owners) or by selected managers.

If the LLC is to be managed by its members, it operates much like a partnership. Each member has an equal say in the decision making process of the company.

If the members choose, they may elect a manager or managers to act in a capacity similar to a corporation's board of directors. These managers are in charge of the affairs of the corporation.

Member management is the normal default rule of state law. This means that if managers are not selected in the articles of organization, the members will direct the affairs of the LLC.

What are the advantages of an LLC?

LLCs offer numerous advantages.

What are the disadvantages of an LLC?

The disadvantages of an LLC include:

Should I choose an LLC or an S corporation?

While the S corporation's special tax status eliminates double taxation, it lacks the flexibility of an LLC in allocating income to the owners.

An LLC may offer several classes of membership interests while an S corporation may only have one class of stock.

Any number of individuals or entities may own interests in an LLC. However, ownership interest in an S corporation is limited to no more than 75 shareholders. Also, S corporations cannot be owned by C corporations, other S corporations, many trusts, LLCs, partnerships, or nonresident aliens. Also, LLCs are allowed to have subsidiaries without restriction.

To learn more about the similarities and differences of S corporations and LLCs,. For advice regarding which entity is best for your particular situation, please contact an attorney or accountant.

What is a publication requirement?

A few states require notice to be published in a newspaper that a corporation or LLC has been formed. States with this requirement include: Pennsylvania (corps only), Georgia (corps only), Arizona (corps and LLCs), Nebraska (corps and LLCs), and New York (LLCs only). The service performed by Business Filings includes the publication requirement for each of the above states except for New York LLCs.

In New York, all LLCs formed or foreign qualified there are required to publish a notice of formation for six consecutive weeks in assigned newspapers. The publication is made at the county level in two newspapers as assigned by the local county recorder. The cost of this requirement varies greatly based upon the county where the business is located. In New York County, the publication costs will be higher than in the rest of the state.

To comply with this requirement, please contact your local county recorder’s office and they will assign the newspapers. The county recorder’s phone number is located in the blue pages of your local phone book.

How do I get started setting up an LLC?

After you decide to form an LLC, articles of organization must be filed with that state and initial fees must be paid. If you choose Business Filings to form your LLC, we will complete these administrative tasks quickly and effectively.

After your articles of organization are filed, your LLC should have an organizational meeting where an operating agreement is adopted, interest certificates are distributed, and other preliminary matters are completed.

Business Filings' LLC kit includes all of the information and paperwork to make this process easier.

1. The cost to incorporate in Delaware is one of the lowest in the country.
   .
2. There is no corporate income tax for corporations incorporated
   in Delaware but not transacting business in the state.
   
    
3. Delaware maintains a separate corporate law court system, called
   the Delaware Court of Chancery, that does not use juries, but only uses
   judges appointed for their knowledge of corporate law.
   
    
4. One person can hold all officer positions of the
   corporation-president, secretary, and treasurer-and serve as the sole
   director. These names are not required to be listed in the articles of
   incorporation.
   
    
5. Shareholders, directors, and officers of the corporation need
   not be residents of Delaware.
   
    
6. Shares of stock owned by persons outside of Delaware are not subject
   to Delaware taxes.

HOW LONG DOES IT TAKE TO INCORPORATE IN DELAWARE?
 

Business Filings' International Package is specifically designed for companies without a mailing address in the United States. It is not intended for foreign nationals living in the US or for international companies that have a US operating address.

The International Package also includes the documents necessary for business owners to open a bank account in their own country.

Business Filings' International Package -- Order Online
Includes:

Note to non-US citizens who will need an Employer Identification Number (EIN) for their businesses -- As of January 2003, the Internal Revenue Service now requires EIN applicants to have a US social security number or an "individual tax identification number" (ITIN) in order to obtain an EIN. The ITIN must be obtained from the IRS, and must be received prior to submitting your application for the EIN. The IRS will no longer accept passports with an application for your EIN.

If you don’t have a social security number and want to apply for an ITIN, you must complete IRS Form W-7 and mail it to the IRS. Click here to access additional information on the ITIN on the IRS web site and to be able to download Form W-7 and the associated instruction sheet. Business Filings does not assist with the preparation of Form W-7 or the obtainment of the ITIN. For questions regarding the ITIN, please contact the IRS. You can find contact information on the IRS web site at www.irs.gov.