Business Incorporations- Advantages And Disadvantages

It's amazing how many online resources are available for business incorporations. A package for incorporation can cost as little as under $300. Preferred states for incorporation are Nevada and Delaware, because of their low fees and their lack of state corporate taxes. You may want to incorporate, as an S-corporation or a C-corporation. Or in some cases you may want to set up a LLC (Limited Liability Company. LLCs and S-Corporations for tax purposes function as pass through entities, they don't pay their own taxes, but they do at least protect your personal assets form seizure. There is incorporation software where you can get the proper forms for your state, you can take the minutes of your first corporate meeting, and even divide up your stock shares. Corporate tax breaks can be substantial, but there are some penalties as well. The big benefits of having a corporation are that you can write off as corporate expenses, things like health care for yourself and your employees, as well as child care. Also the corporate system is to be able to sell shares of stock, and thereby more easily obtain investor financing. This can be on as small a scale as having friends and neighbors by stock in the company. On a much larger scale, is when a company makes its first IPO (Initial Public Offering) and goes public on the OTC (Over the Counter) or even on an established stock market. On the downside, a C-Corporation is a separate taxable entity. It must pay corporate taxes just the same way that you pay personal taxes. These taxes can be substantial. So you have to weigh the positive financial aspects with the negative ones. According to the IRS, an S-Corporation is exempt from Federal Income tax except for taxes on certain capital gains and passive income. On their tax returns, the shareholders (a small number of people) include their portion of the corporation's income, loss, etc. . If you do a do-it yourself incorporation, it is still always wise to get some legal and accountant advice... For legal reasons, you may need to incorporate in the state that you do business in. There are other things that can get complicated about being incorporated. If you are a retail store, or are selling things, you have to register to pay sales tax. On the federal level you have to register with the IRS and get a tax ID number.

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