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Forming a Corporation
Forming a Corporation in the United States has never been easier. Anyone 18 years or older can form a corporation as long as they are a citizen. However, there are several factors that should be taken into consideration when forming a Corporation:
- State and Federal requirements
- Compliance with Corporate law
- Required documentation
- State and Federal taxes and fees
- Local business license fees
- Corporate formalities
There are several significant factors that must be taken into consideration when forming a Corporation. There are various local state and federal criteria that must be met. There are intricate laws governing Corporations that vary from jurisdiction to jurisdiction. There are many required documents that must be filed with the appropriate state and federal offices. There are specific state and federal taxes and fees that must be paid, as well as any local business license fees imposed by local governments. Finally, there are various Corporate formalities that must be observed and followed related to the management structure, Corporate officers, and Board of Directors that vary depending on which Corporate model you choose. 1-800-Company is here to help with all of these requirements. We can help you incorporate your business quickly and easily.
Recommendations for a Corporation
If you have personal or business assets that you would like to protect, you should definitely consider forming a Corporation. Safeguarding the personal or business assets of the owners of the Corporation, known as shareholders, is the most common reason why people incorporate. By forming a Corporation, shareholders can conduct business knowing that they are protected from any personal liability, and their assets are shielded from any undue risk. This kind of protection is especially desirable for professions with increased exposure to potential lawsuits. Professionals such as doctors, lawyers, accountants, and architects regularly incorporate in order to take advantage of the safeguards mentioned above. In addition, many manufacturers, from local microbreweries to global giants like Coors and Anheuser-Busch, take advantage of the protection afforded by establishing a Corporation. Another type of professional who can benefit from establishing their business as a Corporation is independent contractors. If an individual is paid by their client as an independent contractor, there is always the risk that the IRS may determine that he is actually an employee of the company that paid him, which could result in severe penalties because payroll taxes were not withheld. In situations like this, the client has more assurance if they issue payment to the name of a Corporation rather than to the individual himself, avoiding the potential hassle of issuing a 1099 and classifying the individual as a contractor.
Disadvantages of a Corporation
- Limitations to Liability Protection
- Minimal upfront expenditures
- Maintenance of Corporate formalities
Even if a business is incorporated, there are some circumstances in which the shareholder’s personal assets can be vulnerable to seizure. A shareholder of a corporation can be held personally liable if he or she directly and personally injures another person, is the personal guarantor of a bank loan or other debt that the Corporation defaults on, fails to pay taxes that are withheld from an employee’s wages, acts in such a way that is illegal or intentionally fraudulent and causes harm to the Corporation or another individual, or fails to treat the Corporation as a separate legal entity and more as an extension of his personal affairs.
Beyond the limitations to liability protection, there are some minimal upfront expenditures related to the formation of a Corporation and some annual Corporate formalities that must be maintained.