A C-corp, like any other type of corporation, is formed by Articles of Incorporation that must be submitted to a state agency in charge of corporate filing. These articles include the number of authorized shares along with other basic information about the corporation and its incorporators. The corporation-to-be must also designate a registered agent and choose a name that’s available for use in the state where it’s being formed. The cost to form a corporation, such as a C-corp or S-corp, is going to vary by state and depends on several factors.
What types of formalities and regulations are required of a corporation?
Our mission is to empower readers with the most factual and reliable financial information possible to help them make informed decisions for their individual needs. Our writing and editorial staff are a team of experts holding advanced financial designations and have written for most major financial media publications. Our work has been directly cited by organizations what are some advantages of a corporation including Entrepreneur, Business Insider, Investopedia, Forbes, CNBC, and many others. The individuals in these positions make up the executive team and they report directly to the board. Before the passing of the Tax Cuts and Jobs Act in 2017, an LLC treated as a partnership for tax purposes could automatically be terminated due to tax reasons as well.
Pros of an LLC
You should also consider the fact that if you form a corporation, there’s no guarantee that you will be able to maintain your standing in your business. The board of directors can take total control of your business, and you may find yourself forced out of the business that you founded. Depending on the state where you form your corporation, you may spend up to $150 on filing fees, assuming you are filing directly with your Secretary of State.
What is your current financial priority?
It’s sometimes best to incorporate in the state that the business is operating in as there are different types of applications and filing requirements to file elsewhere. For example, incorporating in a different state may require you to file a foreign corporation. On the other hand, filing in a different state may reduce the fees and reporting requirements needed to establish and maintain the corporation. Incorporation is the legal process used to form a corporate entity or company.
Is an LLC Better Than a Corporation?
Some exceptions might apply if the company wants to register for secondary state registrations in the U.S., but an agent or contact person must be present for consumers to contact. Tax deadlines can be different for corporations than they are for private citizens. Some corporations get taxed quarterly on their profits, which means new paperwork must be submitted for review four times per year. There can be monthly reporting duties for sales taxes and local duties. Even the annual tax deadline for C-corporations is a month earlier than it is for private citizens.
- Still, there are advantages and disadvantages to both types of business structures.
- The only thing shareholders have to lose is the value of the shares they hold and any other equity they have in the corporation.
- It might be easy for established corporations to raise capital by selling shares, but forming and maintaining a corporation can be costly.
- With the many advantages, there are also some disadvantages to keep in mind.
- If you want to explore whether incorporating your business is right for you, contact the legal professionals in the UpCounsel marketplace.
- These articles include the number of authorized shares along with other basic information about the corporation and its incorporating entities.
- Remember income is taxed when a corporation earns it and again when it’s paid out to the owners.
Personal asset protection is not always guaranteed by corporate law. Just because a business incorporates itself does not mean that lenders will automatically offer loans or a line of credit. There must be enough assets within the corporation to secure debt financing. If the assets for the company are insufficient, then lenders will often insist that the owners make a personal guarantee on the debt. Businesses receive incorporation through a different process in all 50 states. If the company operates as a C-corp, then it must issue financial statements in most jurisdictions to stay in compliance.
- If the company fails to meet its obligations, then creditors can target only the LLC, not the assets of the members.
- Both types of entities have the significant legal advantage of helping to protect assets from creditors and providing an extra layer of protection against legal liability.
- Although there are several reasons why incorporating can be advantageous to your business, there are a few disadvantages to be aware of as well.
- President Biden has consistently sought to increase the corporate tax rate from 21% to 28% and again proposed this for the 2025 budget.
- It may still be difficult for new partnerships to find agreeable partners that share the same objectives and goals.
- A corporation can be owned by individuals and/or other entities, and ownership is easily transferable via the buying and selling of stock.
