New Business Incorporating
New Business Incorporating
There is much more to starting a business than setting up an office and hiring employees. If you don’t follow your state’s set-up rules, you can put yourself further behind and end up with legal and financial implications that will end up causing costly errors.
Edge Business Solutions has the knowledge and experience to help you make the right decisions from the beginning. With our guidance, you’ll choose the best type of entity and the best state in which to incorporate, file the appropriate start-up documents, establish a tax plan, set up financial systems, ensure Social Security compliance, and provide for health insurance and other employee benefits.
Choosing The Right Type Of Entity
The type of entity as which you incorporate has enormous implications for a new business. Edge Business Solutions can explain the pertinent tax and legal issues and help you determine the best choice for your venture. Here is a brief rundown of several common forms of incorporation.
Corporations
A corporation is a separate legal entity, and its owners or shareholders have no personal liability for the obligations of the corporation. The disadvantage of a traditional corporation (C corporation) is double taxation, since tax is paid on corporate income and again when shareholders pay income tax on dividends.
To avoid double taxation, corporations that qualify may elect to be taxed only once. These corporations are known S corporations.
C Corporations
The corporation is taxed on its income and its shareholders are also taxed on distributions or dividends they receive from the corporation.
It is a separate legal entity from its shareholders.
It offers good asset protection.
S Corporations
The corporation is not taxed, but shareholders must report the income or loss on their individual returns.
It is a separate legal entity from its shareholders.
It offers good asset protection.
It must meet certain legal requirements or risk being treated as a C Corporation.
Limited Liability Partnership (LLP)
An LLP has two types of partners. General partners have management authority as well as personal liability for the firm’s obligations, while limited partners are simply investors with no management authority and liability for only the amount they have invested. An LLP is not a separate tax-paying entity and often is formed with a C or S corporation as a general partnership.
LIMITED LIABILITY COMPANY (LLC)
An LLC requires an organizational agreement like a partnership agreement and must file articles of organization with the Secretary of State. The owners or members are shielded from personal liability for the company’s obligations. An LLC may be taxed as a partnership, so its members must report income and deductions on their individual tax returns.