At RJ Fichera Law Firm, we will help you identify the best business structure for your company or help you transition from a sole proprietorship or another structure into a corporation. We will discuss all the factors that go into forming and operating a business.
Contact us at 610-768-9255 to schedule a Free Consultation and to learn more about corporations and your business idea.
A corporation is a business entity with a separate legal identity from its owners (called shareholders). As a separate legal entity, a corporation can sue and be sued, enter into contracts, own assets, take out loans, and pay taxes. Corporations often use the designation “Inc.” after the business name.
Shareholders own an interest in a corporation and receive its profits, usually in the form of dividends. However, they typically aren't involved with the day-to-day management of the business. Instead, the shareholders elect a board of directors who oversee the business and hire senior management.
An important feature of a corporation is its limited liability. Shareholders are not personally liable for debts of the business. Their liability is limited to their interest in the corporation.
Corporations can be for-profit (both privately owned or publicly traded) and non-profit.
The specific steps for incorporating a business vary between states. Generally, the process involves the following four steps.
Before incorporating, you should weigh the pros and cons of the business structure to decide whether it's right for your business.
Corporations offer many advantages, some of which are listed below.
These advantages should be balanced against the potential disadvantages of incorporation.
The disadvantages of a corporation are less numerous, but they can be significant.
As you can see, these advantages and disadvantages may benefit or work against you – it all depends on the business and your goals. A corporate lawyer can discuss these things with you, helping you narrow down exactly what business structure will work best.
Fortunately, when it comes to corporations, there is more than one type, all of which have their own unique angle and purpose. Exploring these options can help you determine if one corporation type will help you reap the benefits but do so in a more strategic manner.
Aside from being incorporated as a corporation, you may want to consider a specific type of corporation. Below are brief descriptions of specific corporation types.
In a C corporation, or C corp, shareholders are taxed on their income from the corporation, and the corporation is also taxed at the entity level. There's no limit to the number of shareholders a C corp can have, making it an ideal structure for businesses requiring significant capital.
An S corporation, or S corp, is a corporation with special tax status. An S corporation is taxed like a partnership and does not pay federal corporate tax. Instead, the corporation's profits and losses are passed on to shareholders, who are taxed pursuant to the personal tax rate.
A corporation must meet strict eligibility rules to elect S corp status. The number of shareholders is limited to 100, and specific rules exist to determine shareholder eligibility.
Also referred to as B corporations or B corps, certified benefit corporations have a dual purpose to generate a profit while promoting a public benefit. While the status doesn't offer any tax breaks, its value is reputational. B corporations aren't available in every state.
Corporations can also be used to establish non-profit ventures such as charities, educational institutions, and religious organizations. Rather than going to shareholders, profits are reinvested in the business, so non-profit corporations are typically exempt from paying taxes.
Before you incorporate, you may want to consider the below six factors.
Considering these factors with a corporate lawyer will help identify if a corporation is right for your business.
If you need to incorporate a business, do it strategically and smartly. At RJ Fichera Law Firm, we help clients form corporations and plan for their futures. Contact us by completing the online form or calling us at 610-768-9255, and we will schedule a Free Consultation to discuss your business venture.
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