Frequently Asked Questions

What are the two categories a new business structure can fall into after incorporation?

Incorporation is a process that transforms a business from a sole proprietorship or general partnership into a legal entity recognized by a state of incorporation. After incorporation, a new business structure can fall into one of two categories: a Limited Liability Company (LLC) or a Corporation (Corp). An LLC is a simple, legitimate corporate entity that requires less paperwork to form. It becomes official once the articles of organization are complete and any applicable notice requirement is met. The benefits of an LLC include protection of business owners from personal liability for the actions of the business, protection of personal assets in case of a lawsuit, flexibility in management, and pass-through taxation. On the other hand, a Corporation can be either an S corporation or a C corporation. Both types of corporations offer protection from personal liability and credibility with customers. However, they differ in their taxation methods. A C corporation pays taxes on profits and shareholders pay personal tax on the dividends they receive, leading to double taxation. An S corporation, on the other hand, doesn't pay corporate tax and has a pass-through taxation setup, where the profits move to the shareholders and to their personal income tax.