STEP 12: Form Your Corporation

Congratulations on reaching a stage in your entrepreneurial journey where you're considering a more formalized business structure! Establishing a corporation not only amplifies your brand's credibility but also brings a host of strategic advantages. However, like any major decision, weighing the pros and cons of different corporate structures to align with your vision and objectives is essential.

 

Advantages of Forming a Corporation:

 

Liability Protection: One of the most significant benefits of a corporation is the limited liability it offers its owners. Your personal assets are typically safe from any business debts or legal claims against the company.

 

Enhanced Credibility: Clients, vendors, and investors often perceive corporations as more legitimate and trustworthy.

 

Access to Capital: Corporations can raise funds by selling shares in the company.

 

Perpetual Existence: Corporations continue to exist even if the owner leaves or passes away.

 

Tax Benefits: Depending on the type of corporation, there may be tax advantages available.

 

Types of Corporations & and Their Pros and Cons:

 

S Corporation (S-Corp):

Pros:

 

Profits and losses can pass through to your personal tax return, potentially avoiding double taxation.

Limited liability for owners.

 

Cons:

Limited to 100 shareholders.

All shareholders must be U.S. citizens or residents.

 

C Corporation (C-Corp):

Pros:

 

No shareholder limit.

Shareholders need not be U.S. citizens or residents.

 

Cons:

Potential for double taxation: The corporation is taxed, and shareholders are taxed on dividends.

It is more complex and costly to set up and maintain.

 

Limited Liability Company (LLC):

 

Pros:

 

Flexibility in management.

Profits and losses can be passed through to owners without taxation of the business itself.

 

Cons:

Limited life in some states, meaning the LLC might dissolve if a member leaves.

Varying regulations across states.

 

YouTube Video Suggestions:

 

"S Corp vs. C Corp” - A direct comparison of the two most common corporate structures.

 

"LLC vs. C-Corporation" - A comprehensive take on the differences in the taxation.

 

"How to Choose the Right Business Structure" - An overview of the different structures and their implications.

 

Online Resources:

 

U.S. Small Business Administration (SBA) - Offers guidance on choosing a business structure and other helpful resources for entrepreneurs.

 

Incfile - Provides incorporation services and has a wealth of educational resources to help you decide on the right structure.

 

Nolo - Offers legal advice and has articles and resources on the various forms of corporations.

 

HELPFUL TOOLS TO COMPLETE STEP 12:

 

For a good book that gives use cases on how each corporation type is taxed, one can be found here

 

If you'd like to set up your own corporation, the easiest way to do it can be found here

 

For a good professional service to consult with and complete your set up, one can be found here, or if you'd like to get free proposals and choose your own professional within your budget, a list of them can be found here