What is a C Corporation?

A C corporation (or C corp) is a corporation that, for Federal income tax purposes, is taxed under Chapter C of the IRS code. Most major companies are treated as C corporations for Federal income tax purposes. A C Corp is a completely separate tax and legal entity from its owners. C Corporations are one of the most common forms of corporations for large publicly traded companies. C Corporations are subject to corporate income taxes separate from the owners, where most other forms of business entity allow for the company profits to "pass-through" to the personal income tax statements of the owners.

What are the Advantages of a C Corporation?

- Limited Liability for shareholders, owners, directors and officers. As with other entity-types, The C Corp limits the liability of the owners/investors to only the amount of their investment. The shareholders of a corporation are not held personally liable for business debts, claims, or other liabilities absent fraud or certain other exceptions.. The most common example of where an owner or employee of a corporation can be held personally liable for the Corp’s debts is where an owner or employee of the corporation guarantees or signs personally on the debt or obligation.

- Perpetual Existence: The existence of a corporation is considered perpetual. It can however be terminated voluntarily by its owners.

- Tax advantages: Although the double taxation may not sit well with most business owners, there are certain tax advantages such as the Income Splitting Tax rate on corporate income which is usually lower than the tax rate on personal income with certain qualifications.

What are the Disadvantages of a C Corporation?

- Double taxation: Income/profit generated by a C Corporation is taxed. The remaining profits going to the owner (e.g. as a dividend) is then taxed personally again, hence the term Double Taxation.

-Formal corporate record keeping requirements; Corporations require more ongoing paperwork than most other business entities in order to stay compliant with the law and maintain their corporate status, including holding and documenting annual meetings of shareholders and directors and keeping minutes of important corporate meetings. Neglecting formalities could lead to liability exposure such as making it easier for Creditors to "pierce the corporate veil."

How is a C Corporation Taxed?

As stated above, unlike "pass through" entities such as the LLC or S-Corp, the C-Corp is a completely separate taxable entity. This is one of the disadvantages of chosing this corporate form and is therefore rarely used by small businesses.

How is a Corporation Managed?

Corporations are managed by directors and officers. The directors are appointed by the shareholders and are responsible for the overall management of the corporation. The directors appoint the officers who are responsible for the day to management and operations of the corporation. Typical officer positions include president, vice-president, treasurer, and secretary. Other title are used as well. In most states only one director and one officer is required to form an entity, and they can usually be the same person.

What is Stock Par Value?

The par value of a share is the minimum price at which it may be sold to shareholders, and the par value must be the same for all shares of the same class. It doesn't necessarily reflect their real value, and is often set at a low value. The shares can be sold to the initial shareholders, at par value or more, but the price must be the same for each share. Not all states require a par value. Unless otherwise specified, IncBrothers will authorize the minimum number of shares the state requires (assuming the state requires a par value), or without par value if not required by the state.

How Many Shares of Stock will my Corporation Need?

The number of initial shares your corporation is authorized to distribute is specified in the Articles of Incorporation or Certificate of Incorporation. The actual number typically does not matter and can be set at your discretion.

What are Bylaws?

The bylaws of a corporation are internal document/s that has rules for holding corporate meetings and carrying out other corporate. Bylaws do not get filed with the state.

Am I Required to hold Corporate Meetings?

Once you receive the filed Certificate of Incorporation, which signifies the formation of the corporation by your state, your corporation will need to hold an organizational meeting of the initial shareholders and directors. At this meeting the directors will typically adopt bylaws, distribute stock to initial shareholders, and appoint officers. Also, in many states, directors must meet at least once a year, as directors typically must be elected or reelected every year. At the annual meeting the board members accept their election to the board and coduct all other necessary business. The date, time, and location of the annual meeting is typically specified in the bylaws. Other regular meetings may be specified in the bylaws. Special meetings may be called, and it is typically required that directors receive written notice of the date, place, and purpose all special meetings of directors. These formalities are important; failure to follow these formalities and properly document your meetings (i.e. keeping minutes) can place your corporate status in jeopardy. The necessary record keeping material, sample bylaws, and stock certificates are included in the Customized Corporate Kit.

What is an S Corporation?

An S Corporation is a special form of corporation which gets its name because it is pursuant to sub chapter S of the tax code. S Corporations are formed in the same manner as C Corporations but must file IRS form 2553 for federal recognition of S Corp status. (IncBrothers can help with that!) but they are not treated as a separate tax entity as C Corporations are. The S Corporation is a "pass through" entity, similar to that of an LLC. Income derived of an S Corporation is "passed through" to the personal income of its owners. There are certain pass-through differences between the S Corp and the LLC such as in the area of self employment taxes; It is advisable to consult with appropriate tax professionals in this area.

What are the Disadvantages of an S Corporation?

-Corporate formalities: as with the C Corp, the S Corp also requires corporate formalities to be maintained in order to ensure compliance with the law and maintain corporate status. This includes holding and documenting annual meetings of shareholders and directors and keeping minutes of important corporate meetings.

- must file for S status every year. Electing to be an S Corp is not a one time thing. You or your accountant must remember to elect to be an S Corp every year (by the deadline!). For some, this can be annoying.

- various S Corp Restrictions:

    - The maximum number of shareholders for an S Corporation is 100.

This list is not all inclusive. For more detailed information and other aspects regarding S Corporation status, contact your accountant, attorney or local IRS office.

What are the Advantages of an S Corporation?

The advantages of an S Corp are the same as that of a C Corp plus:

Pass-Through Taxation: The S Corporation does not have a separate tax status from its owners and there is therefore usually no double taxation.

What is an LLC ?

A limited liability company (LLC) is a flexible form of business enterprise that blends elements of a partnership and corporation. It allows for the limited liability protection similar to that of a corporation yet has the "pass through" tax benefits of a partnership. An LLC's main advantage over a Partnership is the Limited Liability protection. The ownership structure and all other pertinent details of the LLC are set forth in the Operating Agreement. The operating is an internal contract between the members of the LLC, and set forth ownership interest, owner responsibilities, adding or removing members, terms for ending the LLC, and just about anything else the owners would like to have in there. It is generally not required to form the LLC. It can however be required by lending institutions and the like. With every purchase of the Corporate Kit, a customizable operating agreement is e-mailed in editable format.

How many members/managers must I name to form an LLC?

In most states, one individual must be designated as either manager or member of the LLC in order to form the LLC. Some states do not require providing any name to initially form the LLC.

Is an Alien / Foreigner (non U.S. resident) permitted to own a Corporation or LLC?

IThere are no citizenship or residence restrictions for owning an LLC. Similar, the C Corporation does not have such restrictions either. However, an S Corporation does not allow non-resident aliens to own an S Corp (as opposed to any US citizen or resident alien).

Are there any corporate formality requirements with LLC's as there are with Corporations?

While corporate formalities are required with corporations, they are not required to have and maintain an LLC.

Is the management of an LLC the same as with a Corporation?

A Corporation is managed by its Officers and/or Directors. An LLC on the other hand is typically managed by either its owners (known as Members) in which case its called "member-managed" or its Managers known as "Manager-managed."

Is there a Publication Requirement for Corporations and LLC's?

Most states do not require any publication when a new entity is formed. Where required, IncBrothers provides publication services in all states that require it, for an additional charge. Often, the cost will depend on which county the entity is published in. Contact a representative today for a detailed quote. The following states require publication:
   New York (LLC's only)
   Georgia (Corporations only)
   Arizona (voth LLC's and Corporations)
   Nebraska (corporations and LLCs)

What is the best State to form my business entity?

As a general rule, the best state to form your entity is the state in which the entity is located. There are exceptions. For instance, if you plan on having a large, multi-state operation, it may be wise to form in a different state. Banks for example often chose Delaware because various laws in Delaware are favorable to banks.

If your business has a substantial business activity and or physical presence in a state, the state will expect you to be registered with them and you may be required to register your company as a foreign (i.e. out-of- state) company with your home state, which may subject you to all of the taxes and regulations of that state. IncBrothers provides this service in all 50 states. Contact a representative today for a detailed quote on the cost of registering in a different state (or multiple states)

Does Forming a Corporation Require an Accountant or Attorney?

No and no. An attorney or accountant is not a requirement to form a Corporation, LLC or other business entity. Although it is recommended to consult an attorney or accountant for any legal or tax advice, IncBrothers can take care of the filings for you and save you money on legal fees!

What is a Registered Agent and is it required?

A registered agent is a business or individual designated to receive service of process when a business entity is a party in a legal action such as a lawsuit or summons. In some states the agent is also referred to as a resident agent or statutory agent. Many states require business entities to have a registered agent within the state of incorporation maintaining a physical address within that state. So if for example you wanted to form a corporation in a state requiring a registered agent, but you had no address there, IncBrothers can act as your registered agent in that state. IncBrothers can provide registered agent services for your new or existing business in any of the fifty states. IncBrothers will accept service of process or any other legal or official documents on your behalf and will forward documents to an address designated by you. The price is set at $89 per year. ORDER NOW

Do I need a Corporate Kit (LLC kit?)

A corporate kit is not required and not necessary to open a bank account, lease a car in the entity's name, or conduct other affairs of the business. It is nice to have, though. A corporate kit comes with a binder enclosed in a matching slip case, customized with your company's name on the the spine insert. It comes with a metal die-cast corporate seal with its own carrying pouch, customized with the name of your company and the date and state of formation. It has a set of Index Tabs, custom printed stock or membership certificates with 25 full page stubs. It also comes with a variety of corporate forms on CD- Rom. The corporate kit can be added to your order for an additional price. IncBrothers charges $72 for Kit. ORDER NOW

Do I need a Corporate Seal?

In most states, a Corporate Seal (which is included in the Corporate Kit) is not needed for anything. In some states, however, it may be required to open a bank account, for instance. A Corporate Seal is a customized stamp that contains the name of the entity and the date and state of formation and is ordinarily used on company documents to mark them as official company documents. The Corporate Seal can be ordered separately from the corporate kit if that is all you want; IncBrothers charges $30 for the seal. ORDER NOW

What is a non-profit corporation?

A nonprofit corporation (a/k/a not-for-profit) is any organization that does not aim to make a profit, and which is not a public body. Other entities exist to earn and distribute taxable business revenue to its owners; the nonprofit corporation exists solely to provide programs and services that are of public benefit. While they are able to earn a "profit", such profits must be retained by the nonprofit for its services or programs. Non-profits are however permitted to pay a reasonable wage or salary to its directors to effectively carry out the organization's mission.

How do I form a non-profit?

IncBrothers can incorporate the non-profit in your particular state, and handle all article or certificate filings with the state. Just fill in the order form online or call our toll free number to speak with one of our representatives. IncBrothers can also assist with obtaining the non profit's 501(c)(3) tax-exempt status.

How many directors does a non profit corps need to be formed?

While some states allow 1 or 2 directors to form a non profit, many states require at least 3 directors to form it.

What is 501(c)(3) ?

Having a non-profit corp does not mean that the corporation has tax-exempt status. 501(c)(3) refers to the provision of the IRS code which calls for a variety of non-profit organizations that can be exempt from certain federal income taxes. The IRS sets forth various requirements for becoming eligible for such exemptions. Many states reference Section 501(c) for definitions of organizations exempt from state taxation as well.

What is a "Tax-Exempt" Organization

The term "tax-exempt" is used in reference to non-profit corporations and generally refers to the net profits (proceeds over and above expenses) of a corporation being exempt from federal and/or state income tax, exempt from state sales and property tax (varies by state), and the ability to apply for certain grants and other allocations only available to 501(c)(3) organizations. Also, one of the main benefits of being tax-exempt under 501(c)(3) is the ability to accept donations which are tax-deductible to the individual providing the gift.

What type of non profits are eligible to be tax-exempt under Section 501(c)(3) ?

Only non-profit corporations formed for specific purposes are eligible for tax exemption. Below is a list of acceptable 501c3 purposes as well as other tax-exempt organizations:
501(c)(3)
501(c)(4)
501(c)(5)
501(c)(6)
501(c)(7)
501(c)(8)
501(c)(9)

Religious, educational, charitable, scientific, or literary organizations; testing for public safety organizations. Also, organizations preventing cruelty to children or animals, or fostering national or international amateur sports competition Civic leagues, social welfare organizations, and local associations of employees Labor, agriculture, and horticultural organizations Business leagues, chambers of commerce, and real estate boards Social and recreational clubs Fraternal beneficiary societies and associations Voluntary employee beneficiary associations

Once my non profit organization is formed, how do I make it tax-exempt?

IncBrothers can assist with forming your not for profit as well as the paperwork necessary to become tax exempt. Contact a representative for more information.

How long does it take to be tax exempt / 501(c)(3) ?

The process usually takes approximately 6 months to complete. This will vary depending on many factors.