Sub Chapter S Corporations
S Corporation is a business entity that elects to be taxed under subchapter S of Chapter 1 of Internal Revenue Code. Incorporating an S corporation entails the same formalities and procedures as that of a C Corporation under state statutes. Both corporations offer limited liability status to its shareholders. The key differences between a C Corporation and an S Corporation are in ownership and taxation. S Corporation ownership is restricted to resident citizens and natural persons. The total number of shareholders cannot be more that 100 in S Corporations and the shares can have only one class. The C Corporation has no such restrictions on ownership. In taxation, S Corporation has a pass-through taxation as in a Partnership. C Corporations have to pay corporate tax on its profits directly.
Limited Liability Company or LLC has the same limited liability status as that of corporations. It can also elect to be taxed as a pass-through entity as an S Corporation. LLC formation and operation does not involve as much formalities and procedures as in a Corporation. In LLC Vs S Corp, the ownership restrictions and formalities of an S Corporation is not present in LLC. Membership in LLC can be owned by any entity or person and the formation of an LLC is comparatively uncomplicated. The transfer of ownership in LLC can be unrestrained as that of a Corporation if so constituted in its Articles or Operating Agreement.
As how to incorporate yourself, you have to refer to your state’s statutes governing business registration and incorporation. Online resources are available in most states for the formation and incorporation of your business. The best way is to confer with the state agency handling business registrations and incorporation. Generally it is the Secretary of State’s or Corporation Commissioner’s offices. In some states Department of Revenue deals with business registration and conduct.
Some basic requirements in how to incorporate yourself are 1. Get a valid name for your corporation. 2. File Articles of Incorporation with your state and pay the due fees. 3. Appoint a resident agent. 4. Hold a board of directors meeting and adopt bylaws of the corporation. These are only general directions, to have a complete picture on how to incorporate yourself consult a lawyer or a professional incorporator. There are many more formalities involved such as appointing directors and officers, opening and maintaining minute book to record minutes of meeting, issuing stock certificates, obtaining business permits and licenses etc.
