Corporate

Corporation Info

Corporation
A corporation is a type of business structure created and regulated by state law. What sets the corporation apart from all other types of businesses is that a corporation is an independent legal entity, separate from the people who own, control and manage it. In other words, corporation and tax laws view the corporation as a legal "person," meaning that the corporation can enter into contracts, incur debts and pay taxes apart from its owners. And there are other important characteristics that result from the corporation's separate existence: a corporation does not dissolve when its owners (shareholders) change or die, and the owners of a corporation are not personally responsible for the corporation's debts; this is called limited liability.

A corporation’s shareholders, directors, and officers must observe particular formalities in a corporation’s operation and administration. For example, management decisions must often be made by formal vote and recorded in corporate minutes. Director and shareholder meetings must be properly noticed and documented. Finally, corporations must meet annual reporting requirements and pay ongoing fees in their state of incorporation and in states where they are registered to transact business.

C Corporation

A C corporation is a standard corporation owned by shareholders who elect a board of directors to oversee the management of the business. Shareholders generally have limited liability, even if they are involved in the day-to-day management. The shares of a corporation are freely transferable unless limited by agreement of the shareholders.

The corporation exists indefinitely, unless and until it is dissolved by the shareholders. It is a separately taxable entity, meaning that it must file its own tax return and pay corporate taxes on its profits. There is no limit on the number of shareholders a C corporation may have.

C Election Corporation

  • Allows for limited liability of the owners/officers/directors.
  • Allows an unlimited number of stockholders.
  • Runs on a fiscal or calendar year, which may be designated by the Board of Directors.
  • Profits can be kept as retained earnings.
  • Profits are taxed at corporate rates on an 1120 tax return, separate from the individual return.
(NOTE: Nevada has no state corporate income tax.)

S Corporation

An S Corporation (named in such a manner because of it's organization meeting the IRS requirements to be taxed under Subchapter S of the Internal Revenue Code) is a corporation that is structured in such a manner as to provide a pass-through entity for tax purposes, much like a partnership whose income or losses "pass through" to the individual shareholders' personal tax returns (in direct proportion to their investment or ownership in the company), while still providing the same protections for assets and from liabilities as a traditional corporation. The shareholders will pay personal income taxes based on the S corporation's income, regardless of whether or not the income is actually distributed, but they will avoid the "double taxation" that is inherent to the traditional corporation (or "C" corporation).

S Election Corporation

  • Allows for limited liability of the owners/officers/directors.
  • Typically runs on a calendar year.
  • Requires full disclosure of up to 100 corporate owners.
  • Profits pass through to the individual tax return 1040. No tax brackets separate from the personal tax brackets apply.
  • All profits are taxed on the owner's tax return even if not distributed.
  • State taxes will apply for individuals who are located in a state with an individual state income tax.
(NOTE: Nevada has no state income tax.)
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