Frequently Asked Questions

Question 1

What's the difference between a corporation and an LLC?

Accepted Answer

Both protect owners so they’re not personally on the hook for business liabilities or debts. One key difference is how they’re owned. The owners of LLCs are called members, and their ownership is divided into membership interests. Corporations have shareholders, and their ownership is divided into shares, which are units of stock. 
Another difference is how they’re maintained. Corporations generally have more formal record-keeping and reporting requirements, less management flexibility, and require a board of directors. Even though LLCs are considered easier to start and maintain, investors tend to prefer corporations.

Question 2

How does forming a corporation protect my assets?

Accepted Answer

It ensures that you and other shareholders aren't personally on the hook for company debts and liabilities.

Question 3

Why do many corporations form in Delaware?

Accepted Answer

It helps make sure that you and other shareholders aren't personally on the hook for company debts and liabilities.

Question 4

What are articles of incorporation?

Accepted Answer

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.

Question 5

What are shares, and what types are there?

Accepted Answer

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).

Question 6

How can I go from an S corporation to a C corporation?

Accepted Answer

You need majority shareholder consent to switch before you can change your status with the IRS.

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