Starting a New Business

What is a corporation?

A corporation is a separate entity from the owners of the corporation. It is represented by shareholders having ownership of common stock. The important aspect of a corporation is the limited liability. Shareholders are granted access to profits through dividends, but are not held responsible for the company’s debts.

Which corporation is right for me?

S Corporation: S Corporations pass income, losses, deductions and credit to their shareholders for federal tax purposes. Shareholders of S Corporations report income and losses on their personal tax returns, which help S Corporation avoid double taxation on corporate income. To qualify as an S Corporation, the company must meet the following:

Be a domestic corporation
Have only allowable shareholders
- including individuals, certain trust, and estates and
- may not include partnerships, corporations or non-resident alien shareholders
- Have no more than 100 shareholders
- Have one class of stock
- Not be an ineligible corporation i.e. certain financial institutions, insurance companies, and domestic international sales corporations.
- To become an S Corporation, the corporation must submit Form 2553, signed by all the shareholders.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/S-Corporations

C Corporation: Business owners can have C Corporation where it is subject to double taxation. C Corporation is taxed once as the corporate level on the net income, and again to the shareholders when they receive profits through dividends. C Corporations protect shareholders from direct tax liability and gives more flexibility.
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Corporations

Nonprofit Corporation: These are nonprofit, nonstick corporation created to benefit communities of religious, charitable, social, educational, recreational or similar purposes. These corporations are formed agreeing to the Nonprofit Corporation Law described under 3 types of nonprofit categories:

A corporation organized to operate a church or to be otherwise structured for primarily or exclusively religious purposes is a nonprofit Religious corporation.
A corporation organized primarily or exclusively for charitable purposes and which plans to obtain state tax exempt status under California Revenue and Taxation Code section 23701(d) and/or federal tax exempt status under Internal Revenue Code section 501(c)(3) or organized to act as a civic league or a social welfare organization and which plans to obtain state tax exempt status under California Revenue and Taxation Code section 23701(f) and/or federal tax exempt status under Internal Revenue Code section 501(c)(4) is a nonprofit Public Benefit corporation.
A corporation organized for other than religious, charitable, civic league or social welfare purposes and planning to obtain tax exempt status under provisions other than California Revenue and Taxation Code sections 23701(d) and 23701(f), Internal Revenue Code section 501(c)(4), or not planning to be tax exempt at all, is a nonprofit Mutual Benefit corporation.:

http://www.sos.ca.gov/business/corp/pdf/articles/corp_artsnp.pdf

What are the steps for incorporation?

To create a corporation, one must file the “articles of incorporation” with the Secretary of State. The bylaws and operational agreement of the corporation must be created and adopted. This remains in the business entity, not filed with the Secretary of State. All corporations need to apply for a tax identification number with the IRS. Our team at Tido Financial can not only help create and file the required document, articles of incorporation, but our representatives will be there to guide you in completion of all the required documents as well as personalized bylaws and resolutions for your corporation. We also have a licensed attorney who can prepare the legal paper work for your incorporation.
Call toll free to speak with a representative: 888-770-3077
http://www.sos.ca.gov/business/be/faqs.htm