When incorporating, you have several business entities to choose from. There is the C Corp, S Corp, and LLC (limited liability company). I will not discuss the DBA (doing business as) as an option because this form of entity provides NO legal protection or shelter whatsoever and the owner is personally liable for everything.

C-Corporation:

A C-Corporation is a separate legal entity which can enter into contracts, buy real estate and other assets, sue and be sued. Shareholders in a c-corporation own shares of stock and the company can easily raise funds by issuing new shares of stock. Taxes are filed by the corporation and are completely separate from that of the owners/shareholders.

1. Shareholders own the stock of the corporation.
2. Shareholders elect Directors (known as the “Board of Directors”).
3. Directors appoint Officers (President, Secretary, Treasurer, etc.).
4. Officers run the company (day-to-day operations).

There are many record-keeping requirements with operating a c-corporation, such as holding an annual meeting of shareholders, keeping written minutes of all meetings, etc.

PROS: The oldest, most successful and most prestigious type of business entity; provides personal liability protection; conveys permanence, can reduce taxes (lower tax rate on retained profits, items like healthcare, travel and entertainment are deductible).

CONS: More expensive to set up than a sole proprietorship or partnership; more paperwork and formality required than an LLC (holding Shareholder/Board meetings, keeping minutes and resolutions).

The Lowdown: Though more complicated to run and manage than the LLC, the Corporation is still the oldest and most prestigious form of entity. C Corporations are taxed at a lower rate on profits and are able to deduct items like healthcare, travel, entertainment, etc. that LLC’s and S Corporations cannot. More complicated tax and management issues than an “S Corporation”.

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[tags]incorporate, c corp, s corp, llc, dba, business, owner, shareholder, liability, entity, limited liability, sole proprietor, partnership[/tags]