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 | Domestic Corporation Information This information is presented for educational purposes only. We suggest you talk to your attorney or accountant to see if this information would be beneficial to you and your business needs | |||||||
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A CORPORATION. The label, "C-Corporation" merely refers to a standard, general-for-profit, state-formed corporation. Sometimes referred to as a "C" Corp, a "For Profit Corp" or a "Domestic" Corp. Characteristics of the "C-Corporation" include: THE "C" OR DOMESTIC CORPORATION. Functioning in a Different State. When the corporation functions in a different state, the site of its designated resident or registered agent is sometimes called its "statutory domicile". Derived Powers. Corporations are creatures of statute and their powers are derived from the constitution as well as the laws of the state in which it is incorporated. Rights and Privileges. Once brought to life, this artificial entity has most of the rights and privileges that a person has. Corporate Ownership of Business. A corporation can own and operate businesses, hire employees, buy and sell goods and services, make contracts, rent office space, have checking and savings accounts, maintain retirement plans for employees, and can sue and be sued. Corporations Need Leaders. Although the corporation is a legal "person" with rights of its own, a corporation cannot market its products, nor can it perform any of the physical tasks required to operate a business. You and those hired to work within the structure of the corporation do all of this. Stock or Shares. Because a "C" corporation is a separate legal entity, a stockholder (owner or partial owner) is a holder of shares of stock in the corporation and is not in legal danger for the acts of the corporation. Litigation Protection. The owner(s) of the corporation are not responsible for the corporation’s acts. Stockholders. Stockholders are not the employer of those working for the corporation nor are they the owner of any corporate property. Owners are Different from Corporation. The important point to remember is that when you own a corporation, the corporation exists as a separate entity or person. You can live anywhere you choose, in any state or country, but it is the corporation that conforms to the requirements of the state in which it resides. Asset Protection. The corporation's debts and taxes are separate from its owners (shareholders), thereby offering the greatest personal liability and asset protection of all business structures. Tax Advantages. In addition to liability protection, incorporating offers attractive tax advantages, prestige, the road to better financing and the ability to raise cash. Estate Planning Advantages. Because the corporation continues to exist even after the death of a shareholder, it offers tremendous estate planning advantages. Corporation Ownership. Corporations can own automobiles, real estate, yachts, aircraft, vacation or summer homes, houses, and any type of physical or real property. Insurance and Retirement. Corporations can provide health and life insurance, retirement benefits and expense accounts. Benefits of a Nevada Corporation. Many feel that Nevada is the state with the greatest benefits to protect you and your corporation. Benefits of a Wyoming Corporation. Because Wyoming has been developing laws and regulations favoring individual corporation ownership, it too is a state with good benefits to protect you and your corporation. Benefits of a Delaware Corporation. Delaware was the first state in the U.S. to create an environment as a corporate haven. While its benefits are different from Nevada and Wyoming, it also creates good benefits to protect the corporation. REASONS FOR INCORPORATING YOUR BUSINESS. Reduces Personal Liability. Incorporating helps separate your personal identity from that of your business. Sole proprietors and partners are subject to unlimited personal liability for business debt or law suits against their company. Creditors of the sole proprietorship or partnership can bring suit against the owners of the business and can move to seize the owners’ homes, cars, savings or other personal assets. Once incorporated, the shareholders of a corporation have only the money they put into the company to lose, and usually no more. Tax Advantages – Deductible Employee Benefits. Incorporating usually provides tax-deductible benefits for you and your employees. Even if you are the only shareholder and employee of your business, benefits such as health insurance, life insurance, travel and entertainment expenses may now be deductible. Best of all, corporations usually provide an increased tax shelter for qualified pensions plans or retirement plans (e.g. 401K’s). Anonymity. Corporations can offer anonymity to its owners. For example, if you want to open an independent small business of any kind and do not want your involvement to be public knowledge, your best choice may be to incorporate. If you open as a sole proprietorship, it is hard to hide the fact that you are the owner. And as a partnership, you will most likely be required to register your name and the names of your partners with the state and/or county officials in which you are doing business. Easier Access to Capital Funding. Capital can be more easily raised with a corporation through the sale of stock. With sole proprietorships and partnerships, investors are much harder to attract because of the personal liability. Investors are more likely to purchase shares in a corporation where there usually is a separation between personal and business assets. Also, some banks prefer to lend money to corporations. An Enduring Structure. A corporation is the most enduring legal business structure. Corporations may continue on regardless of what happens to its individual directors, officers, managers or shareholders. If a sole proprietor or partner dies, the business may automatically end or it may become involved in various legal entanglements. Corporations can have unlimited life, extending beyond the illness or death of the owners. Easier Transfer of Ownership. Ownership of a corporation may be transferred, without substantially disrupting operations or the need for complex legal documentation, through the sale of stock. Centralized Management. With a corporation’s centralized management, all decisions are made by your board of directors. Your shareholders cannot unilaterally bind your company by their acts simply because of their investment. With partnerships, each individual general partner may make binding agreements on behalf of the business that may result in serious financial difficulty to you or the partnership as a whole. Adds Credibility. A corporate structure communicates permanence, credibility and stature. Even if you are the only stockholder or employee, your incorporated business may be perceived as a much larger and more credible company. Seeing “,“inc.”.” or “corp.” at the end of your business name can send a powerful message to your customers, suppliers, and other business associates about your commitment to the ongoing success of your venture. BENEFITS OF A CORPORATION Incorporation provides many benefits to business owners. One of the primary benefits is asset protection. As owners of a corporation, shareholders' liability is limited to the amount invested or capitalized to organize the corporation. For example, creditors of your corporation must generally satisfy their claims by seizing assets of the corporation rather than the personal assets of the shareholders. In contrast, as a sole proprietor or partner in a general partnership, you are financially responsible for all liabilities of the business, and your personal assets are subject to seizure or lien by creditors. QUESTIONS REGARDING CORPORATIONS Does incorporation require extensive paperwork? No. When electing to utilize our Incorporation services, we undertake preparation of the Articles of Incorporation, Acceptance of Resident Agent, List of Officers, and any necessary records and resolutions to maintain compliance with the State of Nevada. Our professional services may also be utilized to obtain the federal tax identification number to establish corporate bank accounts. The Purchase Order forms contain all of the information necessary to establish your entity in the State of Nevada. We can also assist with establishing a limited partnership, limited liability company, or offshore corporation. How many directors and officers are required to form a corporation? Almost all states require at least one natural person to serve as director of the corporation. The same person may hold the offices of President, Secretary, and Treasurer and may be the only person appointed to the Board of Directors. The name(s) and address(es) of the person(s) holding said offices or appointed to the Board of Directors must be filed with the Secretary of State annually. The Officers and Board of Directors are appointed by the shareholders of the corporation. The shareholders ultimately decide the course of action of the corporation. Who owns and controls the corporation? The corporation is owned by the shareholders, who may be domestic or foreign natural persons or legal entities. In general, since the shareholders appoint the Officers and Directors, the corporation is controlled by the shareholders. The name(s) and address(es) of the shareholder(s) are officially recorded in the stock ledger which is typically maintained by the Resident Agent or an Appointed Custodian. What is a 'C' corporation? The "C-Corporation" designation merely refers to a standard, general-for-profit, state-formed corporation. To be formed, an Incorporator must file Articles of Incorporation and pay the requisite state fees and prepaid taxes with the appropriate state agency (usually, the Secretary of State -- Corporations Division). What is an 'S' corporation? An S corporation is a standard C Corporation that has had an S filing form completed to the IRS. There are several reasons for filing an S corporation, double taxation normally is not one of them! For more read Corporate definitions and attributes. What is a Resident Agent and when do I need one? The term 'Resident Agent' means the agent (natural person or legal entity) appointed by the company upon whom process or a notice or demand authorized by law to be served upon the company may be served. Most states require a Resident Agent to have a street address for the service of process. The street address of the Resident Agent is typically the registered office of the company, and the person may be the owner, an employee, or other hired or appointed individual within the state the company is registered in--if the company is registered in another state (like Nevada or Wyoming) than the one where the owners live, then a hired Registered Agent in the state of the filing must be hired or appointed to receive service of process. What do I need to do to protect my corporate veil? To keep litigants from piercing the corporate veil, the following should be done: How do I protect my various business assets? The strategy in today's litigious environment is to segregate assets. One of the easiest ways is to keep your operating entities (the ones that deal with the public) away from the asset-owning entities. For this reason, more than one entity is advisable when having assets and also when dealing with the public. You may want to have the operating entities hold fewer assets and lease expensive assets from the asset-owning entities. (Consult with your accountant to ensure that controlled group status issues are addressed) | ||||
Minimum LLC Do-it-Yourself CDs for a Corporation Secretary of State Office in Each State Free Offer for Home Based Business Booklet | ||||
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