Why Form a Corporation or LLC?
The single most important reason people cite for forming a corporation or LLC when they do business is to safeguard the personal assets of the owners – that is the shareholders, stockholders or member of the corporation or LLC – against potential claims from creditors. Sole proprietors and general partners in a partnership are personally liable for all debts and obligations of their business, including loans, accounts payable, and liability from defective products. Additional Resources You may wish to check the IRS website for additional explanation of what the different structures might mean to your tax situation. If our Common Questions or the IRS website does not give you enough information about taxes, please contact your accountant or CPA for more personal and in depth assistance.
Liability. If you are doing business as a sole proprietor and get sued, your personal assets are at risk. If you are doing business as a corporation or LLC and get sued, the person sues your corporation/LLC. Not you personally. One lawsuit could ruin you. The minimal cost of incorporating or forming an LLC far outweighs the benefits of being sued. What is an S Corporation? An S or Subchapter S corporation is one in which the profits or losses flow through to the individual shareholders. If you decide to form an S corporation, you must file an IRS Form 2553 within 75 days of the date of your incorporation. We complete this form for you, free. An S corporation can only have 35 shareholders. The IRS requires that: (1) there be less than 75 shareholders, (2) the shareholders must be individuals, estates or certain qualified trusts, who consent in writing to the S corporation election, (3) the shareholders can not be non-resident aliens, and (4) an S corporation cannot issue preferred share
