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A corporation is a legal structure that exists separate from the owners of that business. There are many reasons to form a corporation, including:

Limited Liability
Reduced Tax Exposure
Increased Credibility
Perpetual Existence

In choosing a corporate form, you should consider the advantages and disadvantages of the two primary types of corporations, C-Corporations and S-Corporations.

In addition to the benefits listed above, a C-Corporation is especially beneficial in that it enables the business to raise significant amounts of capital by selling shares of stock to an unlimited number of shareholders. By contrast, an S-Corp is restricted to having no more than 100 shareholders. Further, C-Corps can have non-US residents as shareholders and can issue multiple classes of stock, whereas S-Corps cannot.

Apart from these stock-related benefits, C-Corps may be used flexibly with other business forms. For example, unlike S-Corps, C-Corps can be owned by other C-Corps, as well as S-Corps, LLCs, partnerships, and certain trusts.

One of the key features that distinguishes C-Corps from S-Corps is that, unlike S-Corps, C-Corps are separately taxable entities. C corporations file a corporate tax return reporting profits or losses, and must pay taxes at the corporate level on any profits. The C-Corp is also subject to more formalities (such as annual reports, minutes and meetings) in order to maintain corporate status.

The considerations involved in choosing a corporate form are often quite complex and the paperwork involved can be daunting. The attorneys at Elliott & Davis are committed to offering you customized service, clear communication, and peace of mind as we guide you through the process of forming your corporation.