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Types of Corporations
Incorporating a business provides many benefits for any business, regardless of the type or size of the business. Once you have decided that the benefits of incorporating a business outweigh the costs, the next step is to decide what type of corporation is right for your specific business activity? We will briefly explain S Corporations and C Corporations and the advantages of incorporation.
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What is a C corporation?
A C corporation provides limited liability protection to owners. Owners are typically not personally responsible for business debts and liabilities. A C corporation may also offer greater tax advantages because of the ability to deduct employee benefits.
Advantages of a C corporation
- Limited liability protection. Owners are not typically responsible for busines debts and liabilities.
- Unlimited number of owners. The C corporation can have an unlimited number of shareholders.
- Unlimited life. A corporation's life-span may be perpetual and does not cease to exist when a corporation's owner dies.
- Easy transfer of ownership. Ownership of a C corporation is easily transferable through the sale of stock.
- Easier to raise capital. Additional capital can be raised by selling shares of stock.
What is an S corporation?
S Corporations* offer the same advantages of standard or C corporation without double taxation.
The letter “S” represents a chapter in the IRS tax code. An S corp is not a type of corporation, it is actually a type of corporate taxation.
Advantages of an S corporation
- Limited liability protection. Owners are not typically responsible for business debts and liabilities.
- Pass-through taxation. No tax is paid at the business level on the corporation's profits. Income and loss is reported on the owner's personal tax returns and any tax due is paid at the individual level.
- Unlimited life. A corporation's life-span may be perpetual and does not cease to exist when a corporation's owner dies.
- Easy transfer of ownership. Ownership of a C corporation is easily transferable through the sale of stock.
- Easier to raise capital. Additional captial can be raised by selling shares of stock.
Domestic Corporation vs. Foreign Corporation
Domestic and foreign in this context refers to the State where the Corporation is created. A company which is registered in California and which does business in California is operating as a domestic Corporation. If the same company is doing business in Oregon (has a physical presence), it is operating as a foreign Corporation in the other State (Oregon).
This commonly comes up when LLCs are created in States with business-friendly tax laws but does business in their home State. It may also occur when a business starts expanding into other States. A foreign corporation is required to register with the Secretary of State in the foreign State. The corporation certificate of good standing issued by the home State will be needed. To register your out of state company to transact business in Wyoming, you'll need to file a Certificate of Authority.
The purpose of registering is to meet regulatory and tax requirements of the foreign State.
How do you know if you're operating in a State?
Are you:
- Selling products or services in that State through some party directly tied to the LLC (a distributor or rep).
- Owning property (real estate or a fleet of trucks or example) in the State.
- Having offices or facilities in the State.
- Having a bank account in that State.
Incorporate a business online or Call us to place your order by phone: Toll-Free 1-877-239-2608
*NOTE: All corporations are initially set up as C corporations. But, sometimes it is advisable to consider having your company request S-Corp status from the IRS (this requires a special form submitted by the client). Even an LLC may also elect to be taxed as an S Corp. You can ascertain whether to request S-Corp status after consulting with a tax professional or CPA.
Email us at agents@mywyomingllc.com or call toll free (877) 239-2608 to speak with one of our friendly, highly trained business formation specialists to set up your S corporation.
Got questions?
Email us at agents@mywyomingllc.com or call toll free today (877) 239-2608