-The Incorporating Company LLC's online guide for your business knowledge-
The information below will help to answer any questions that you have about the definitions of a Corporation, a Limited Liability Company, a Limited Partnership and many more. It will explain to you the differences between the various entity types and hopefully, answer any questions that you may have about forming your business! But... should you have any additional questions or need any clarification at all, please take advantage of our live help! feature. The Incorporating Company LLC is here to serve you!
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What is a Corporation?
A Corporation is a separate and legal entity that has the legal rights and duties of a person, even though it acts only through the acts of natural persons who are its officers, directors and employees. To form a Corporation, an authorized agent prepares and files the entity's Articles of Incorporation with the appropriate governmental office in the jurisdiction in which you have chosen to incorporate. The Articles are signed by an Incorporator, and this process is called Incorporation. A Corporation is owned by its Shareholders, managed by its Board of Directors and operated on a daily basis by its Officers.
What is a Limited Liability Company?
A Limited Liability Company is also a separate and distinct legal entity, and like a Corporation, an LLC has a legal existence separate from its owners. An LLC limits the personal liability of its owners. In this case, an authorized representative prepares and files the company's Certificate or Articles of Formation. The Certificate is signed by an Authorized Person or Organizer, and this process is called Formation. One benefit of an LLC is something that is called "Pass Through Taxation"; this means that unlike a General Corporation, the profits and losses of the company are only claimed one time, therefore avoiding double taxation. An LLC is owned by Members and run by its Managers.
What is a Limited Partnership?
A Limited Partnership is the business relationship between two or more individuals or entities. Like other business entities, an authorized person prepares and files the Articles of Organization with the appropriate governmental agency. The Articles are signed by an Authorized Person, Organizer or General Partner, depending on jurisdictional requirements, and this particluar process is called Organization. Limited Partners invest in the Partnership, and General Partners run and manage the business. The Limited Partner's financial liability for the Partnership's debts is directly correlated to the percentage of investment and ownership. The General Partner could be held personally responsible.
What is an S Corporation, and how is it different than a General Corporation?
"S" status is a formal election made by a small business corporation with the IRS. The election permits the income of the S Corporation to be taxed to the shareholders of the corporation rather than to the corporation itself - the same type of "Pass Through Taxation" as noted for an LLC. This avoids double taxation, an unfortunate drawback of a General Corporation. This election, Form 2553, must be filed with the IRS within 75 days of the entity's date of incorporation. Some key elements of an "S" Corporation are a follows:
Pass Through Taxation
Limited to a maximum of 75 shareholders
Non-Resident alien shareholders are not permitted
Corporation has only one class of stock
Shareholders may only be individuals, not business entities (except as described in Sections 401(a), 501(c)(3) or 1361(c)(2)(A))
Corporation's tax year runs on a calendar year
What is a Registered Agent?
A Registered Agent is an entity or individual representative that is responsible for receiving and forwarding legal process (ie: a summons, legal complaint, subpoena), governmental communications and tax items to its client. Most jurisdictions require all entities to maintain a Registered Agent throughout the life of the Corporation , LLC or other business entity, regardless of changes in management or location. The Incorporating Company LLC offers the lowest annual fee in the industry for its representation services...
ONLY $50 per year for the life of your Delaware business!
Do I need a Federal Tax Identification Number (FEIN) for my business?
Regardless of your entity type, if you plan to have any employees or open a bank account, the answer is yes. You may obtain the FEIN on the IRS website. If you, as an owner or authorized agent, are a U.S. citizen, you may contact the IRS directly at 1.866.816.2065. However, you must complete IRS Form SS-4 if you are not a citizen of the U.S.
What are the general benefits of incorporating in Delaware?
According to the Delaware Secretary of State ...
More than half a million business entities have their legal home in Delaware, including more than 50% of al U.S. publicly- traded companies and 58% of the Fortune 500.
Businesses choose Delaware because it provides a complete package of incorporation services, including modern and flexible corporate laws, the highly-respected Court of Chancery and a business-friendly State Government. The Delaware Court of Chancery is widely recognized as the nation's preeminent forum for the determination of disputes involving internal affairs of the thousands upon thousands of Delaware corporations and other business entities through which a vast amount of the world's commercial affairs is conducted. Its unique competence in and exposure to issues of business law are unmatched.
No ongoing physical presence is required - only need to appoint a Delaware Registered Agent
No minumum investment required and no need to open a bank account in Delaware
Only one person is required to own and operate a Corporation or LLC in Delaware
As owner, your name does not need to be on formation document.
Relatively low Incorporation/Formation filing fees and annual Franchise Tax
No Sales Tax for anyone, so company purchases are tax free
No Corporate Income Tax, Capital Shares or Stock Transfer Tax or Inheritance Tax for Corporations that operate outside of Delaware or for out-of-state Stockholders
What are the tax advantages in Delaware?
The State of Delaware has adopted a clear, bipartisan policy to attract new business and encourage the expansion of existing operations. Key tax features, which now make Delaware more competitive, include:
No State or local general sales tax
No personal property or inventory taxes
Real property taxes are among the lowest in the country
Additional tax credits and reduction of gross receipts taxes for new and expanded businesses
Additional tax credits on corporate income and reduction of gross receipts taxes for new and expanding businesses, located in 30 targeted census tracts
Property tax relief for new construction and improvements on existing property
The exemption of certain investment and holding companies from corporate income tax
The adherence of the State tax structure to the federal definition of corporate net income so that companies may take full advantage of any federal tax law change, such as more rapid depreciation of newly-purchased assets
Two approved foreign trade zones will allow the deferment of import taxes
Public Utility Tax rebates of 50% on increased consumption for qualifying industries and a reduced rate for manufacturers and agricultural processors