There are several types of corporations to choose from. The choice depends on your goals, structure, and your industry requirements.
- A corporation is a separate entity from the shareholders (owners).
- It is formed by filing the Articles of Incorporation with the Secretary of State.
- Shareholders are not personally liable for the debts of the corporation.
- Their liability is limited to the amount invested or rather the amount of their shares.
- Shareholders appoint the Board of Directors.
- The Board of Directors hire C-suite executives to run the day-to-day operations of the corporation.
- In a corporation with a small number of shareholders, they fullfill all of the roles.
Closely Held Corporation
- A corporation can also be known as a “closely held corporation.”
- There a limited number of shareholders (in California it is limited to only 35 shareholders) in a closely held corporation.
S-Corporation or Subchapter S Corporation
- An S-Corporation is a corporation that is designated a
“Small Business Corporation” by the Internal Revenue Service.
- “Pass Through” taxation or the shareholders (as opposed to the corporation) are taxed on the profits and losses of the business.
- Can only have one hundred (100) shareholders
- Must be U.S. Citizens or Resident Aliens to be a shareholder.
- A professional corporation (PC) is owned by shareholders who are members of a profession (e.g., doctors, lawyers, or accountants).
- A PC is only allowed to have one type of share.
Non-Profit Corporation (501(c)(3))
- A non-profit corporation is designated “non-profit” by the Internal Revenue Service.
- Must meet stringent IRS reporting requirements
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