A corporation is a very common form of business organization, created when the incorporators file the articles of incorporation with a state authority. A corporation is owned by one or more shareholders, and the operation of the business is usually placed entrusted to a board of directors, subject to the articles of incorporation and bylaws. An important characteristic of corporations, and one that distinguishes it from sole proprietorships and partnerships, is that the shareholders of a corporation are not generally liable for the obligations or debts of the corporation.
For tax purposes, there are two types of corporations: C-corporations and S-corporations. A C-corporation pays tax on its income, and the shareholders pay tax again when the corporation’s profits are distributed to them in the form of dividends.
In contrast, an S-corporation is does not pay taxes on its income. Instead, each shareholders pays tax on his or her share of the corporation's income, just as if the shareholders received the income directly. Every corporation is a C-corporation unless it elects to be treated as an S-corporation, and there are significant restrictions on which corporations may make the election.
We can help you incorporate your business, if that’s the right choice for you, by writing articles of incorporation and bylaws, filing them with the proper state authorities, and drafting other documents such as buy-sell agreements that may be appropriate for small corporations. Once your business is incorporated, we can help you with legal advice to mitigate risk and keep your business in compliance.