What are the advantages of forming a C Corporation? Compared to an S Corporation?
The C Corporation offers many advantages over a sole proprietorship or a partnership, and some advantages over an S Corporation. While the C corporation and the S corporation have very similar characteristics, the C corp is subject to double taxation (at the corporate level and the shareholder level), while the S corp only gets taxed at the shareholder level. Both C corps and S corps have shareholders who elect a board of directors, and both offer their shareholders limited liability, protecting the personal assets of the shareholders from the actions of the company. The board of directors is the decision making body of the corporation, who elects the officers, or the persons that operate the company on a daily basis. In many small corporations, the officers and directors are frequently the same person.
Why should you incorporate?
• Limited Liability: a corporation protects the personal assets of the Shareholders from any judgments, financial obligations or bankruptcies that the company may face. Typically the shareholder is only responsible for the amount it invested, and nothing further.
• Corporations can raise money by selling stock and acquiring new shareholders.
• Corporations may deduct the costs of benefits it provides to officers and employees (e.g. health insurance premiums, parking, etc.).
An S corporation has all of the same advantages and must follow the same formalities as a C corporation, but each is taxed differently, and the S Corporaiton has different requirements. The C corporation is taxed at the corporate level, on the corporations earnings, and at the shareholder level, when the company pays dividends. The S corporation is only taxed at the shareholder level, because the profits pass directly to the shareholders.
The S corporation has a number of restrictions that the C Corporation does not have, including the fact that an S Corp can only have 100 shareholders, and that all shareholders must be US citizens or residents, and none of the shareholders can be corporations or LLCs.
How many stockholders does a Florida corporation need?
Florida only requires a corporation to have only one shareholder.
Do I need an EIN for my corporation?
Yes, your corporation will need an EIN to begin conducting business. The EIN is required to open bank accounts and to apply for credit cards. Furthermore, you cannot begin to hire employees without an EIN number, because this number is required for payroll taxes as well as federal and state taxes.
What is a business name search?
Florida allows you to search its database before registering your corporation to ensure that the corporate name you are trying to register has not already been taken by someone else. We conduct a name search for your business to ensure proper registration, and notify you if the name you have chosen is not available.
Can a corporation own another corporation?
Yes, a corporation can own shares in another corporation. This is usually referred to as a parent company. A subchapter S corporation can also own another C corporation, but a C Corporation cannot own shares in a subchapter S corporation.
How many shares should my corporation issue?
This question really depends on how many shares you need. We can
discuss this during our initial consultation.
What are shares of stock?
The stock of a corporation represents the original capital paid into or invested in the business by its owners. Stock is distinct from the property and the assets of a business which may fluctuate in quantity and value.
A share of the company’s stock reflects an ownership interest in the company. If the company has 200 shares of stock, and you own 100 shares, then you own 50% of the company. The number of shares also has an impact on the company’s net income. When a company has a profit and decides to pay dividends to its shareholders, it usually does so based on the number of shares. So, a company may decide to pay a dividend of $3 per share. In the above example, because you have 100 shares, you would receive $300 in dividends.
The stock of a business is divided into shares, the total of which must be stated at the time that the corporation is formed. Given the total amount of money invested in the business, a share has a certain declared face value, commonly known as the par value of a share. Shares represent a fraction of ownership in a business. A business may have a number of different classes of shares, each having distinctive ownership rules, privileges, values or voting rights.
Ownership of shares is typically evidenced through the issuance of a share certificate. A share certificate is a legal document that specifies the amount of shares that you own, the name of the company, the class of share, and the par value.
How do I add a stockholder to my corporation?
The process for adding a new shareholder is something that should be designated in your articles of incorporation, shareholder agreement or in your bylaws. If your articles, shareholder agreement or bylaws do not state how to add a shareholder, then you should hold a meeting of the board of directors to approve the new shareholder. It is possible that you will require the vote of all the other shareholders. If there are sufficient shares, you can sell the new shareholder shares outstanding; if not, your company will have to issue new shares. If you have questions, you should contact us, and we will work with you to determine the best way to add shareholders to your corporation.
If I am not a U.S. citizen but I live in the U.S., can I be a corporate stockholder or officer?
There are no restrictions on foreign ownership of a company formed in the United States. The procedure for a foreign citizen to form a company in the United States is the same as for a US resident. It is not necessary to be a US citizen or to have a green card to own a corporation or limited liability company formed in the United States.
Note, however that a nonresident of the United States CANNOT be a shareholder in an S-Corp. There are no restrictions with the C corp and foreign ownership. While anyone can start a C-Corporation, only citizens and residents can own S-Corporations. Contact us to determine which corporate formation is best for your current situation.
When do I need to file a DBA?
When you are operating your business under a name other than the legal name, you need to register your DBA. This means either your legal name if you operate a sole proprietorship, or the corporate name.
Example: If your name is George Saint and you own a restaurant called “Saint’s Pizza” as a sole proprietor (not registered as a corporation or LLC), then you need a DBA.
Example: If your corporation is FinalMeet, Inc. and you operate under the name “Race Stars”, then you need to file a DBA to recognize “Race Stars” as the corporate name.