- What is a corporation?
Incorporation means creating a separate legal entity that acts as a corporation, protecting the owners from having personal liability for the business debt or responsibility.
2. Why incorporate?
Advantages of Incorporation, Limited liability
Access to funding is easier, Tax benefit (at times)
Existence continues indefinitely, regardless of changes in ownership
Improved customer and investor confidence
3. What are some of the corporation types I can form?
C Corporation: Provides limited liability and attracts investors, but is subject to double taxation.
S Corporation: Avoids double taxation by passing income to shareholders but has ownership restrictions.
Nonprofit Corporation: Primarily for charitable purposes, usually exempt from taxes.
Professional Corporation (PC): For licensed professionals, such as doctors or lawyers.
Read Also:
- https://quantumlawsolutions.com/top-10-questions-entrepreneurs-ask-about-corporate-law/
- https://quantumlawsolutions.com/7-questions-to-navigate-corporate-mergers-and-acquisitions/
- https://quantumlawsolutions.com/5-must-know-questions-and-answers-about-corporate-governance/
4. How do I decide between an LLC and a corporation?
Answer: LLCs provide flexibility, easier management, and pass-through taxation, whereas corporations are suited for bigger businesses requiring external funding.
5. What are articles of incorporation?
Answer: A legal document submitted to the state to officially incorporate a corporation. It contains some basic information, such as the name and address of the corporation and type of shares issued.
6. What is the difference between a corporation and a sole proprietorship?
Answer:
Corporation: A separate legal entity that provides limited liability and formalities.
Sole Proprietorship: Owned by one person with no separation between personal and business liabilities.
7. What is a registered agent?
Answer: A registered agent is a person or entity authorized to receive legal and official documents on behalf of the corporation.
8. Do I need corporate bylaws?
Answer: Bylaws describe the ways the firm operates internally, such as how decisions are made, the role of the board, and meeting standards.
9. How is a corporation taxed?
C Corp.: Corporate income taxed; dividend paid through to shareholders is then taxed again (double taxation).
S Corp.: Income passes through to shareholders; no double taxation.
10. What’s a shareholder agreement?
Answer: A contract among shareholders defining their rights and responsibilities, addressing share transfers, dispute resolution, and exit strategies.
11. How much does incorporation cost?
Answer: Costs vary by state and include filing fees, attorney fees, and annual maintenance fees. Expect costs between $100 and $1,000 for basic incorporation.
12. Do I need a separate bank account for my corporation?
Answer: Yes, to maintain legal separation between personal and business finances, which is critical to preserving limited liability.
13. How do I issue shares to owners?
Answer: Shares are issued based on terms established in articles of incorporation. There must be records maintained in corporation’s stock ledger.
14. What are the continuing requirements for a corporation?
Answer:
Filing annual reports
Holding regular board and shareholder meetings
Keeping minutes and corporate records
Payment of taxes and state registration renewal
15. Can I change my business structure later?
Answer: Yes, but a business can change its structure by filing the proper paperwork. However, this might cost something and have tax implications.