IncFile.com - Business Incorporation Solutions

The Corporate/LLC Kit is a professional binder enclosed in a matching slip case, customized with the name of your company on the spine insert. It comes with a metal die-cast corporate embossing seal with its own carrying pouch, customized with the name of your company and the date and state of formation. It has a set of 6 Mylar Reinforced Index Tabs, 25 custom printed stock or membership certificates with 25 full page stubs. It also comes with a variety of corporate forms on CD-Rom. The kit can be added to your order of our standard formation service, and it is included with the Premium Package.

A Corporate Seal is a customized embossing stamp that contains the name, date and state of formation of your company. In some jurisdictions a corporate seal can be required to open a company bank account. It is typically used on company documents to mark them as official. The Corporate seal is included in the Corporate/LLC Kit.

A Publication Requirement is a compliance mandate that requires the creation and ownership of an LLC to publish an announcement in local newspapers upon being filed. Upon completion of this requirement an affidavit is typically filed with the state to inform them that the publication requirement has been satisfied. Currently the states which require thus are Pennsylvania (corporations only), Georgia (corporations only), Arizona (corporations and LLCs), Nebraska (corporations and LLCs), and New York (LLCs only). At this time IncFile does not provide this service.

Unless you plan on having a large, multi-state operation, it is generally best to form your company in the state in which it is located.

Generally speaking, most states will expect you to be registered with them if there is substantial ongoing business and/or a physical presence in that state. If you do form your company in a state other than the one in which your company is located, you may ultimately need to register your company as a foreign (out of state) company with your home state, which will subject you to all of the fees, taxes, and regulations of that state.

No, it does not. An attorney is not a legal requirement to form a Limited Liability Company. While we always recommend consulting the appropriate legal and accounting specialists, we can take care of the filings for you and save you the attorney fees.

Almost every state requires a corporation or an LLC to have a Registered Agent (sometimes called a resident agent, statutory agent, or agent for service of process). The Registered Agent address is the address that will be used by the state for any official legal and tax correspondence. The Registered Agent address must be a physical, in-state street address; P.O. Boxes are not acceptable. If needed, IncFile can provide you with a Registered Agent for only $99.00 per year, and any official legal and tax correspondence from the state will be forwarded to your billing/shipping address.

NOTE: If you require us to provide a registered agent, the address cannot be used as a general business/mail forwarding address. Only official legal and tax correspondence from the state will be forwarded, and any other mailings to the registered agent may result in additional charges.

There are no citizenship or residence requirements for ownership of a C Corporation or an LLC. The S Corporation however does not allow nonresident aliens to be shareholders (owner), but any US citizen or resident alien may be a shareholder (owner). You would, of course, require an in state street address for the state to forward official legal and tax correspondence including service of process, known as the registered agent address, but neither residency nor citizenship is required for ownership of a C Corporation or an LLC.

A corporation consists of all three: officers, directors and shareholders. Shareholders are the owners of the corporation and elect the directors. Directors guide and are involved in the fundamental decisions of the corporation on behalf of the shareholders. Officers are selected by the directors and run the day-to-day operations of the corporation. These do not need to be separate people. Any person can fill all three positions. In small businesses, one person can be the only shareholder, the only director, and the only officer.

The 2553 Form, known as the sub chapter S election, is required to be filed with the IRS to get S-Corporation status for purposes of federal taxation. Filing this Form with the IRS is used to convert a C-Corporation into an S-Corporation.

Par value is a nominal dollar amount given to corporate shares. It doesn’t necessarily reflect their real value, and is typically set at a low value (i.e. one dollar or one cent). The par value of a share is the minimum price at which it may be sold to shareholders, and the par value must be the same for all shares of the same class. The shares can be sold to the initial shareholders, at par value or more, but the price must be the same for each share. Not all states require a par value. Unless you specify otherwise, IncFile will authorize 1500 shares (this is due to the fact that 1500 is easily divisible by 2, 3, 4, 5, 6) with a par value of one cent, or at no par value if not required by your state.

The bylaws of a corporation are an internal document that contains rules for holding corporate meetings and carrying out other formalities according to state corporate laws. Bylaws are not filed with the state.

The number of initial shares your corporation is authorized to distribute is specified in the Articles of Incorporation. The actual number is more or less arbitrary, at your discretion. IncFile uses a default number of 1500 shares (this is due to the fact that 1500 is easily divisible by 2, 3, 4, 5, 6), with a par value of one cent (if your state requires par value, otherwise no par value will be assigned). Some states charge more to form a corporation with a high number of shares and/or high par value.

Once you receive the filed Articles of Incorporation, which signifies the formation of the corporation by your state, your corporation will need to hold an organizational meeting of the initial shareholders and directors. At this meeting the directors will typically adopt corporate bylaws, distribute corporation stock to initial shareholders, and appoint corporate officers. Also, in most states, directors must meet at least once a year, as directors typically must be elected (or reelected) each year. At the annual meeting the board members accept their election to the board, and transact any other necessary business. The date, time, and location of the annual meeting is typically specified in the bylaws. Written notification of the annual meetings is not usually required, but it is probably a good idea. Other regular meetings may be held as spelled out in the bylaws. Special meetings may be called, and it is typically required that directors receive written notice of the date, place, and purpose all special meetings of directors.

NOTE: It is important to observe these formalities and take corporate minutes of the required meetings. Failure to follow these formalities and properly document your meetings (i.e. keeping minutes) can place your corporate status in jeopardy. The necessary record keeping material, sample bylaws, and stock certificates are included in the Customized Corporate Kit provided by IncFile.

Unlike many other business entities in which the profits pass through to the owners’ personal tax return (e.g. LLCs, S Corporations, etc.), the C Corporation is a completely separate taxable entity. The C Corporation pays federal taxes on the net profits (after all expenses, including salaries and bonuses) of the business by filing the 1120 form with the IRS. The after tax profits can be paid out to the owners (shareholders) in the form of dividends, or retained for reinvestment of the business. The first $50,000 of net income is only federally taxed at 15% rate, and the next $25,000 is taxed at a 25% rate. Different states have different rules on how they tax corporations.

A Corporation is managed and run by its directors and officers. The directors are appointed by the shareholders and are responsible for the overall management and corporate governance of the corporation. The directors appoint the officers who are responsible for the day to management and operations of the corporation. The typical officer positions are president, vice-president, treasurer, and secretary, although there can be more and sometimes different titles are used. In most states only one director and one officer is required, and they can usually be the same person.

• More extensive record keeping requirements

Corporations typically require more ongoing paperwork than most other business entities in order to stay compliant with the law and maintain their corporate status. This includes holding and documenting annual meetings of shareholders and directors and keeping minutes of important corporate meetings.

• Dividend payments can lead to double taxation

Dividends are paid to shareholders/owners from the after-tax profits of a C Corporation. The dividends received by the owners are then tax personally on dividends received. This means the income is taxed twice, if dividends are paid.

Limited Personal Liability

This limits the liability of the owners/investors to only the amount of their investment. The owners of a corporation are not personally liable for business debts, claims, or other liabilities.

• Perpetual Existence

The existence of a corporation is considered perpetual, although it can be terminated voluntarily by its owners (shareholders).

• Better fringe benefits

While all business entities can provide fringe benefits to its owners and/or employees, the Corporation allows for a greater range of benefits.

• Advantageous Corporate Tax Treatment/Income Splitting

Tax rate on corporate income is usually lower than the tax rate on personal income up to the first $75,000 in income. The owners can arrange salaries and bonuses in conjunction with retained corporate earnings to lower their overall tax rate.

A C Corporation is a completely separate tax and legal entity from its owners, and owners who work in the business are treated and taxed as employees of the corporation (Note: The “C” in C Corporation refers to a sub chapter of the tax code; C Corporations are one of the most common forms of corporations, and they are frequently referred to generically as corporations). C Corporations are subject to corporate income taxes separate from the owners, where most other forms of business entity allow for the company profits to “pass-through” to the personal income tax statements of the owners. As such, C Corporations are the most formal business entity and they have greater tax reporting responsibilities than other business entities. C Corporations allow for profits to be retained in the business, if desired, and frequently these profits can be taxed at a lower rate than personal income. C Corporations can also pay out after tax profits to its owners in the form of dividends, but this can also lead to double taxation.

An S Corporation is a special form of corporation (Note: The “S” in S Corporation refers to sub chapter S of the tax code). S Corporations are based on C Corporations but they are not treated as a separate tax entity as C Corporations are. Instead, the income of an S Corporation is “passed through” to the personal income of its owners (shareholders) in proportion to their ownership interest. An S Corporation is created by forming a traditional C Corporation and then filing the IRS Form 2553 (The Subchapter S Election) for federal recognition of S Corporation tax status. While the S Corporation has many of the same features as a C Corporation, there are some important differences.

Note: While the S Corporation features similar pass through taxation to an LLC, in the area of self-employment taxes an S Corporation can have an advantage over an LLC. The compensation (salary and bonuses) of S Corporation shareholders is subject to self-employment tax, but not on the profits automatically allocated to them as a shareholder. This can be an advanced and aggressive tax strategy, so be sure to consult with the appropriate tax and legal specialists before pursuing it.