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What is a corporation?
A corporation is a business entity created by filing formation documents with the state, a process also known as incorporation.
Just like an LLC, a corporation is a legal entity that is separate from its owners, which can protect you from any business liabilities or debts. However, corporations offer other important benefits, like shareholders and the ability to seek outside investors.
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Why start a corporation?
Attract investors
Raise funds by appealing to investors who may prefer corporations for the ability to offer stock.
Entice employees
Attract and keep top talent by offering competitive benefits packages that include shares of your company.
Look more official
Corporations are often seen as more credible, which can make it easier to do business with other companies.
Corporation benefits
There are several advantages of forming a corporation. Incorporating offers liability protection, which means that owners of a corporation are generally not personally responsible for business obligations like debts or lawsuits. Incorporation also allows you to add shareholders and raise money from outside investors.
Corporation requirements
Corporations are typically required to adopt by-laws, hold annual shareholder meetings, issue written corporate resolutions for significant decisions, and file annual reports. Our service allows you to efficiently form your corporation the right way. We also have packages with essential documents and services to meet these corporation requirements and keep you in compliance.
Is a limited liability company a corporation?
A limited liability company is a different type of business entity than a corporation. Each one has unique formation requirements, tax requirements, and ownership structure. Typically, LLCs have more flexible tax requirements and fewer reporting requirements, but corporations make it easier to transfer ownership—shares of stock—and court outside investors.
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S corporation vs. C corporation: What's the difference?
S corporation and C corporation designations are both valid choices when incorporating a business—and whichever you choose, we can help make it happen. Before you make your decision, make sure you understand the pros and cons of each.
S corporation
Taxes on profits only
Shareholders only pay taxes on profits received. Income gets passed through to the owners instead of being taxed at the corporate and shareholder level, so you avoid double taxation.
Shareholder maximum
The maximum number of shareholders is 100, and they all must be U.S. citizens or residents.
Only common stock available
S corporation owners can only get common stock, which comes with voting rights.
C corporation
Taxes on income and profits
Income is taxed twice—the business pays corporate income tax on its net income, and then the shareholders also pay personal income tax on the profits they receive.
No shareholder maximum
There are no limits on who and how many people can own shares of a C corp.
Preferred stock available
C corp owners may get preferred stock, which usually comes with no voting rights but priority to dividends before common shareholders.
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How to incorporate
Choose and reserve a business name
The catchier and more memorable your business name, the more likely it is that consumers will choose you over your competitors. We include a name check with our formation services and can reserve names for you, if possible in your state.
Appoint a registered agent
Most states will require you to appoint a person or entity as a registered agent (also called an agent for service of process or statutory agent). A registered agent agrees to receive lawsuits, subpoenas, and other official documents on behalf of your business. You can appoint us as your registered agent to make things easier for you.
Prepare and file articles of incorporation
Although requirements differ by state, corporations generally must file articles of incorporation. These constitute the charter and legal framework for the business and may contain key information such as the principal location where business will be conducted. When we file these articles for you, it's typically sent to the Secretary of State.
Frequently asked questions
How much does it cost to incorporate?
There are typically four types of fees for incorporation: a fee to file the articles of incorporation, which depends on your state; a first-year franchise tax prepayment, which can range from $800 to $1,000; fees for various governmental filings, which can range from $50 to $200; and attorney fees, should you seek attorney help.
S Corp vs. LLC: What's the difference?
Both types of business entities help protect owners from being personally on the hook for business liability or debts. LLCs have one or more individual owners, while corporations have shareholders, and corporations generally have more formal record-keeping and reporting requirements.
Even though LLCs are considered easier to start and maintain, investors tend to prefer corporations.
Even though LLCs are considered easier to start and maintain, investors tend to prefer corporations.
How does forming a corporation protect my assets?
It helps make sure that you and other shareholders aren't personally on the hook for company debts and liabilities.
What are articles of incorporation?
Articles of incorporation are a requirement for forming a corporation. They comprise a formal document that establishes the corporation as a separate business entity.
The articles become a public record and provide important information about the corporation, including its name, contact information, and information about its shares of stock. The exact information that the articles need to include vary by state.
The articles become a public record and provide important information about the corporation, including its name, contact information, and information about its shares of stock. The exact information that the articles need to include vary by state.
What are shares, and what types are there?
Think of shares as your piece of the ownership pie—and there are two main types (i.e. "common" and "preferred").
Common shareholders have voting rights and can receive dividends if they're issued. Preferred shareholders have priority over common shareholders when it comes to dividends and payout claims (if the corporation becomes insolvent).
Common shareholders have voting rights and can receive dividends if they're issued. Preferred shareholders have priority over common shareholders when it comes to dividends and payout claims (if the corporation becomes insolvent).
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