Which Business Incorporation Is Right For Your Company?
You may think you aren't in need of incorporation, or that business incorporation is the only next step for your venture. Whether you're a one-man operation or the employer of dozens, you may have more options that you think. Before you take any next step, take a little time to consider the various types of incorporation and to decide which is right for you.
There are two general types of incorporation and your company will typically form either a corporation or a limited liability company. There are some advantages to each, and some limitations.
A corporation may be either an "S" corporation or a "C" corporation. The major difference between these two options is related to the way in which the taxes are handled. Once the "C" corporation is formed, the changes necessary for creating an "S" corporation is basically a matter of filing the appropriate paperwork.
The management of the company is one of the most important differences between the corporation and the limited liability corporation. A limited liability corporation is typically managed by a person appointed to that task. The corporation is typically overseen by a board of directors.
The daily management is delegated to a person or group of people who answer to the board. That difference alone could be sufficient for determining which of the two entities you should choose when you're ready for business incorporation.
Another major difference lies in the way money flows into the company. With a corporation, stock in the company are offered for sale. Those who purchase the stock become the "owners" of the company. Stock may be either common or preferred, depending on the type of corporation formed.
The number of stockholders will also depend on whether you form an "S" corporation or a "C" corporation. With regard to a limited liability company, members of the company (or owners) funnel money into the business as needed or as required, and profits (or losses) become the property of those members.
One of the commonalities of these types of business incorporation is that stockholders, shareholders and members who are generally considered the owners of the company have no personal liability for the debts owed by the company. That protection is typically one of the main reasons people seek business incorporation.
Remember that business incorporation is a serious matter and you may very well need the advice of a professional before you take any action.
There are two general types of incorporation and your company will typically form either a corporation or a limited liability company. There are some advantages to each, and some limitations.
A corporation may be either an "S" corporation or a "C" corporation. The major difference between these two options is related to the way in which the taxes are handled. Once the "C" corporation is formed, the changes necessary for creating an "S" corporation is basically a matter of filing the appropriate paperwork.
The management of the company is one of the most important differences between the corporation and the limited liability corporation. A limited liability corporation is typically managed by a person appointed to that task. The corporation is typically overseen by a board of directors.
The daily management is delegated to a person or group of people who answer to the board. That difference alone could be sufficient for determining which of the two entities you should choose when you're ready for business incorporation.
Another major difference lies in the way money flows into the company. With a corporation, stock in the company are offered for sale. Those who purchase the stock become the "owners" of the company. Stock may be either common or preferred, depending on the type of corporation formed.
The number of stockholders will also depend on whether you form an "S" corporation or a "C" corporation. With regard to a limited liability company, members of the company (or owners) funnel money into the business as needed or as required, and profits (or losses) become the property of those members.
One of the commonalities of these types of business incorporation is that stockholders, shareholders and members who are generally considered the owners of the company have no personal liability for the debts owed by the company. That protection is typically one of the main reasons people seek business incorporation.
Remember that business incorporation is a serious matter and you may very well need the advice of a professional before you take any action.