One common legal entity for businesses and organizations is a corporation. Choosing a corporate business structure allows the owners to completely separate themselves from the business entity. To incorporate your business, you must file “Articles of Incorporation” with your state.
Limited Liability for Owners
One of the main benefits of a corporation is the safety imparted to the owners. Corporation status limits the liability of the owners, and the business has its own ability to enter into contracts, establish credit and invest in assets. Any liabilities, such as lawsuits or debt, are solely the responsibility of the corporation rather than the corporation. This means that any assets personally owned by an owner remain safe from debt collection or lawsuit settlements.
Other Benefits of a Corporation
Corporations are also commonly chosen business structure because they have tax benefits, as well as benefits regarding wages and compensation. The limited liability also attracts many more investors to corporations compared to other business structures, such as a sole proprietorship, partnership or LLC.
The Regulations for Corporations
In addition to filing Articles of Corporation with your state, you also must adhere to other regulations to remain in compliance as a corporation. You must strictly follow rules of operation, including appointing a Registered Agent and officers and electing a board of directors. Your state also might have other requirements in place.
One of the main downsides of a corporation is that it is often double taxed. A C Corporation pays income tax on the business income. Then, any owners or shareholders must also pay income tax on their distribution or dividends. However, you can create a pass-through corporation that allows the profits to pass through to individual tax returns by forming what is known as an S-corporation.
A corporation also must have a tax ID number from the IRS. If you are unsure if you already have an IRS-EIN-Tax-ID, then you can perform an EIN lookup. At IRS EIN Tax ID Filing Service, we provide IRS EIN lookup among our other services. Contact us to find out more.