You’ve decided to form a Corporation in the US, but you’re not entirely sure which type is the best fit for you. Here’s a quick look at the types of corporations you can choose from, as well as the pros/cons of registering your business as one.

Registering a new Corporation with the US government involves filing the necessary paperwork with the state in which you want to form your Corporation. The specific requirements and fees for forming a Corporation vary by state, but generally, you will need to file articles of incorporation with the Secretary of State, choose a registered agent, and obtain any necessary business licenses and permits.

Types of Corporations

C Corporation

This is the most common type of corporation and is taxed as a separate entity from its owners. C Corporations can have unlimited shareholders and can issue different classes of stock.

S Corporation

S Corporations are similar to C Corporations, but they are taxed as pass-through entities. This means that profits and losses are passed through to the individual shareholders and reported on their personal tax returns. S Corporations have certain restrictions, such as a limit of 100 shareholders and only one class of stock.

B Corporation

B Corporations are a relatively new type of corporation that are legally required to consider the impact of their decisions on their stakeholders, including the environment and society, in addition to their shareholders.

Nonprofit Corporation

Nonprofit Corporations are formed for charitable or educational purposes and are exempt from certain taxes.

 

Pros / Cons of Registering Your Business as a Corporation

 

Pros:

1. Limited liability: Like an LLC, a Corporation provides limited liability protection to its owners. This means that the personal assets of the owners are generally protected from any business-related liabilities or debts.
2. Perpetual existence: Unlike an LLC, a Corporation has perpetual existence, meaning that it can continue to exist even if a shareholder leaves or dies.
3. Ability to raise capital: Corporations can raise capital through the issuance of stock, making it easier to attract investors and raise funds.
4. Credibility: Similar to an LLC, registering your business as a Corporation can lend credibility to your company, as it is seen as a more formal and professional structure than a sole proprietorship or partnership.

 

Cons:

4. Cost: Forming a Corporation can be more expensive than other business structures, as there are fees associated with filing the necessary paperwork and maintaining compliance with state regulations.
5. Increased paperwork: Compared to other business structures, Corporations require more paperwork and formalities to maintain compliance with state and federal regulations.
6. Double taxation: C Corporations are subject to double taxation, meaning that profits are taxed at the corporate level and again when they are distributed to shareholders as dividends.
7. Limited flexibility: Corporations have strict rules and regulations governing their structure and governance, which can limit flexibility and decision-making.

 

Conclusion

Overall, registering your business as a Corporation can be very beneficial to you, considering limited liability protection, perpetual existence, and the ability to raise capital. However, it is important to consider the potential drawbacks as well, such as increased paperwork, costs, and limited flexibility.

As always, we recommend that you consult with a legal or financial professional to determine what type of business structure is the best fit for you, as every personal situation and business goal is unique.