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S-Corporation (S-Corp)

An S-Corporation (S-Corp) is a special type of corporation created through an IRS tax election. S-corps are designed to avoid double taxation on the corporate income. The corporation’s income, losses, deductions, and credits pass through to shareholders, who report this flow-through of income and losses on their tax returns.

File Articles of Incorporation:

Submit the required incorporation documents to the state’s Secretary of State. This step officially creates the corporation as a legal entity.

Create Bylaws:

Draft and adopt bylaws that outline the corporation’s operating rules and governance structure. These bylaws guide the internal management of the corporation.

Issue Stock Certificates:

Distribute stock certificates to the initial shareholders. This formalizes ownership and specifies the shares each shareholder holds.

Obtain EIN:

Apply for an Employer Identification Number (EIN) from the IRS. The EIN is used for tax reporting and other business-related purposes.

Elect S-Corp Status with IRS:

File Form 2553 with the IRS to elect S-Corp status. This election allows the corporation to be taxed as a pass-through entity, avoiding double taxation.

Comply with State Requirements:

Follow any additional state-specific requirements, such as filing initial reports and paying necessary fees. This ensures the corporation remains in good standing with the state.

C-Corporation (C-Corp)

A C-Corporation (C-Corp) is a legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity. C-Corps are subject to corporate income tax and provide the benefits of limited liability, perpetual existence, and easier access to capital.

File Articles of Incorporation:

Submit the required documents to the state’s Secretary of State. This step officially establishes the corporation as a legal entity.

Create Bylaws:

Draft and adopt bylaws to outline the corporation’s governance and operating procedures. Bylaws set the rules for how the corporation will be run.

Hold Organizational Meeting:

Conduct an initial meeting to adopt bylaws, elect officers, and issue stock to the initial shareholders. This meeting formalizes the corporation’s organizational structure.

Issue Stock:

Provide stock certificates to the initial shareholders. Issuing stock formalizes ownership and specifies the shares each shareholder holds.

Obtain EIN:

Apply for an Employer Identification Number (EIN) from the IRS. The EIN is necessary for tax reporting and employment-related activities.

Register for Taxes:

Register for state and local taxes as required. This step ensures compliance with all relevant tax authorities.

Comply with State-Specific Regulations:

Follow any additional state-specific requirements, such as filing initial reports and paying necessary fees. Compliance with these regulations is essential to maintain the corporation’s legal standing.

 

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Doing business as

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Business types at a glance

How it protects youLLCCorporationNonprofitSole prop
Limited liability protection

This ensures you or other partners aren't personally on the hook for company debts and liabilities.		✔✔✔-
How it's managed and maintained
Flexible management structure

Corporations require a board of directors, annual meetings, record keeping, and more. LLCs and sole proprietorships have rules too—but they're less strict.
✔--✔
State compliance requirements

After you form, there are annual requirements to keep your business in good standing.		✔✔✔-
How it's taxed
Taxed

LLCs and corporations have multiple tax options.		✔✔-✔
Tax exempt

Nonprofits with 501(c)(3) status are exempt from federal income taxes.		--Only with 501(c)(3) status-
How it can grow
Flexibility to raise capital

Get access to funds from banks, venture capital firms, and foundations.		✔✔✔-
Able to IPO

Only corporations can sell shares on the stock market.		-C corp only--