Starting A Corporation?
A Corporation (also known as a “C-Corporation”) is a separate legal entity that can shield the owners from personal liability and company debts. As a separate entity, it can buy real estate, enter into contracts, sue and be sued completely separately from its owners. Also, money can be raised easier via the sale of stock; its ownership can be transferred via the transfer of stock; the duration of the corporation is perpetual (the business can continue regardless of ownership); and the tax advantages can be considerable (i.e. you are able to deduct many business expenses, healthcare programs, etc. that other legal entities cannot). Income is reported completely separate via a tax return for the corporation.
After a corporation has been formed, it may elect “S-Corporation Status” by adopting an appropriate resolution and completing and submitting a form to the Internal Revenue Service (some states require their own version). Once this filing is complete, the corporation is taxed like a partnership or sole proprietorship rather than a corporation. Thus, the income is “passed-through” to the shareholders for purposes of computing tax returns.
Most new small corporations elect S-Corporation Status so profits and losses can be added to the shareholders personal tax returns without having to pay taxes on profits once, then again when they are given back to the shareholders as income (dividends). This is known as “double taxation” and is the reason why S-Corporations were created. An S-Corporation can also revert back to regular Corporation status fairly easily.
If your looking to file a corporation. Please contact support and we can help