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Getting Down To Business - FAQ

FAQ's Frequently Asked Questions
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WHAT IS A CORPORATION?

A corporation is a business organization with its own separate "legal identity" totally apart from the person(s) that own and control it. A corporation has the power to do anything that an individual person can do ie: own property, conduct business, borrow money, sue and be sued.

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BENEFITS OF INCORPORATION: Liability

Protection of the assets you have "earned" is one of the main reasons that small businesses owners begin to consider the advantages of incorporation.

A corporation provides protection from liability for its owner(s) and investor(s) to protect their assets. If you are currently operating a business as a sole proprietorship (one owner), or a partnership, you are personally responsible for the total liability of your business.

If a judgment is entered against your unincorporated business, - it is entered against you personally- against your home or any other property you may own.

By incorporating your business, you are personally protected from the potential liability of a sole ownership business. No one can attach your home, car, or your personal property if you lose a lawsuit or your business simply fails.

The primary benefit of incorporation is protection. Protection of your personal assets. Incorporation protects your personal assets from the creditors of the corporation, even if you are the sole director and stock holder.

Other benefits of incorporation can include greater tax deductions for health insurance and medical expenses, not just for you, but for your entire family; and lower payments for social security tax and Medicare tax.

Ease of Doing Business: Many suppliers, stores etc. offer discounts to corporate accounts. Bids on goods and services from corporations are often favored over the bids of sole owned businesses.

Incorporation also offers additional access to operating capital through the sale of stock in your corporation.

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HOW MANY PEOPLE DOES IT TAKE TO FORM A CORPORATION?

Generally, only one (1) person is required to form a corporation - YOU. One person can be named to fill all of the positions on the corporation's board of directors; the corporation's president, treasurer, and secretary

Who Owns the Corporation?

A corporation is owned by its stock holders. A corporation may have only 1 shareholder or a multitude. The person(s) (stock holder(s)) with 51% of the stock makes the final decisions about how the corporation will operate and conduct business.

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"S" CORPORATIONS: The term "S" corporation refers to the way the corporation is taxed. In an S corporation, profits and losses, flow through the corporation to the individual shareholder(s) and the profits are taxed as personal income, and the losses are included in your personal income tax return, much as they are for sole proprietorships. There are no corporate level income taxes on an "S" corporation. Many 'new' businesses, and their "owners", benefit by electing to be taxed as an "S" Corporation. To 'qualify' for "S" taxing status, a corporation simply files an IRS form (2553) within 75 days of incorporation. "S" status is available to small companies having up to 35 shareholders.

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"C" CORPORATIONS:

Just as with an "S" corporation, the term "C" corporation refers to the way the corporation is taxed. Profits of a C corporation are taxed at a level percentage rate. Because any dividends paid to shareholder(s) from the corporation's 'retained' earnings are included on the shareholder's individual income tax return as income from dividends, profits of a C corporation are subject to "Double Taxation". A corporation is 'automatically' taxed as a C corporation unless you file the required form 2553 electing to be taxed as an S corporation within 75 days of incorporation.

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OPEN & CLOSED CORPORATIONS

An open corporation refers to the corporation's structure. Open status is for corporations that either have or intend to have more than 30 shareholders, or those who plan to make large public offerings of their stock.

Closed corporate structure is the most common for small businesses. It allows a business to have the benefits of a corporation and avoid many of the formalities required of an Open Corporation making public stock offerings. Closed corporations are limited to 30 or fewer stockholders and are restricted in the transfer of their stock.

PAR & NO PAR VALUE STOCK

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A corporation can have only 1 stock holder or a multitude of shareholders. A corporation can choose to issue either par or no par value stock. Par value stock has a stated value. The value is the minimum amount contributed by the shareholder. No par value stock has no stated value. No par value stock allows the Board of Directors (you), to determine the value of each share of stock issued as appropriate. Unless otherwise specified, we will process your corporation's paperwork as issuing no par value stock. IRS filings

Corporations in general file an annual income tax return (form 1120 or 1120S), much like any other business is required to file. States require a simple one page annual state report form updating the information on the corporation's address and the names of current directors and officers.

DO I HAVE TO HIRE A LAWYER TO INCORPORATE?

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NO! You can form a your corporation entirely without the expense of hiring a lawyer by using our services to handle the administrative paperwork required to form a corporation. We offer services at low cost because we are not lawyers and do not give legal advice. Instead, our service is limited to helping you inform yourself about the procedures that affect your life, so that you can make your own informed decisions and providing the public an easy and inexpensive way to handle routine procedures by offering quality document preparation and providing the procedural information you need to process your paperwork solving your own routine legal problems without a lawyer.

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WHAT DOES IT COST TO INCORPORATE?

Each state has a set fee charged by the state for filing the Articles of Incorporation with the Secretary of State, establishing a corporation within that particular state. The fee varies widely from state to state. A list of the individual "State Fees is hyperlinked to this page.

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WHAT IS THE PROCEDURE FOR INCORPORATION?

Our service makes the paperwork of forming a corporation as simple as answering a few questions on the order form. The form gives us all of the information necessary to complete your paperwork to form a corporation in any state.

You Make the Decisions, We Do the Paperwork. We handle all of the paperwork details of forming your corporation, by processing the information/order form and completing the Articles of Incorporation, (called a Certificate of Incorporation in a few states) to form your new corporation in the state you choose.

Our document preparation service is a one time $149 fee. We return to you the completed Articles of Incorporation, ready to be signed and mailed to the Secretary of State for filing - we'll even include the envelope pre-addressed to the Secretary of State in the state of your choice. You'll include the state's fee when you mail the paperwork to be filed. It's that simple.

The only other fee you are required to pay, is the fee charged by the Secretary of State for incorporation of a business. The "State Fees vary widely from state to state from a low of $40 in Maryland and South Dakota to a high of $300 in Texas.

Like the fee, the length of time it will take to actually have your business incorporated, will vary widely from state to state. You will receive copies of your filed paperwork and a file number with confirmation of your corporate filing from the Secretary of State's office. The average time is approximately 30 days from the day you mail in the paperwork to the Secretary of State, until you receive the filed copies from the Secretary of State.