What is the difference between a corporation and an LLC?
A corporation is a distinct entity, separate of the individuals who own and operate it. Therefore, those individuals are generally not personally liable for corporate legal matters. A common, practical explanation is that a corporation exists as a legal entity in the same sense that an individual does. A corporation operates with generally the same rights and responsibilities as an individual, meaning that it is accountable for its own activities, such as paying taxes, being insured, protecting itself in legal matters (either as a plaintiff or a defendant), borrowing money and having a voice in political matters.
An LLC is a Limited Liability Company. It is similar to a corporation in its structure in that it is a separate legal entity from the individuals who own and operate it. However, for tax purposes, those individuals are treated more like partners or sole proprietors with business profits and losses passed through to them on the basis of the structure defined in the LLC’s Operating Agreement.
Which organizational structure is best for me?
Before making this choice, you must consider that your choices are not limited to setting up a corporation or an LLC. Establishing a sole proprietorship or a partnership may be better. There are many things to consider in making this kind of decision. Generally, a sole proprietorship would be appropriate for a very small business. As the (potential) size and complexity of the company increases, the concepts of a partnership, a limited liability company, or a corporation tend to become more advantageous, in that order. The choice is typically how much of your personal assets, if any, you are willing to put at risk.
A wise decision will be based, at least in part, on answering the following questions.
- How much startup capital will I need?
- What is my personal risk/reward factor?
- How many stakeholders will there be?
- How will each stakeholder’s share be determined?
- What structure is best suited for my business plan and growth strategy?
I want to incorporate. Now what?
You should get expert, third party advice from a Certified Public Accountant and a tax attorney. Even if you have decided that you want to form a corporation, you must still choose between a C-Corp and an S-Corp structure. This decision typically boils down to anticipated gross revenues and tax-related issues. Ultimately, your selection will be sole-proprietorship, partnership, LLC, C-Corp or S-Corp. ACS offers a free, no obligation consultation to help you determine which business entity is best for you.
How long does take to incorporate?
Filing generally takes three to four weeks. Same day service is now available in some states. The length of time to incorporate often depends on the state in which you are incorporating and the type of service you request.
In which state should I incorporate my business?
It would seem that the obvious answer would be that you would file in the state where your business’ executive offices are located, but that is not necessarily true. There may be a case for incorporating in a state where your business has nexus, another state where an operating arm of your business is located. Even then, it is also possible, and sometimes even advisable, to incorporate in a state in which the tax and other corporate regulations favor the business entity, regardless of its locations. Nevada and Delaware are examples. Making the right decision is another reason for seeking the advice of a CPA and a tax attorney.
What information must I provide in order to incorporate?
You will need to file the name of the company, the name and address of director and the name and addresses of the shareholders.
Is the information I provide confidential?
The names of directors and shareholders are a matter of public record.
Who should be the legal representative for my business?
Most states require that your company has an Agent registered with the state. All governmental and legal correspondence is funneled through that Agent.
The registered Agent may be an officer, an employee, an attorney or almost any other responsible person or entity residing at a physical address in the state in which you choose to incorporate. American Corporate Services, Inc. offers registered agent services at affordable annual rates.
May a sole shareholder also be designated as the Director a company?
What is the minimum number of shareholders?
One. This person may also be the director.
May a corporation be a shareholder?
May nominee shareholders be used?
Yes. American Corporate Services, Inc. can provide a nominee shareholder.
Is a resident shareholder required?
Is a company secretary required?
What is the standard share capital?
Can share capital be issued in other currencies?
How shares must be issued and paid?
Do I need to open a bank account in the US?
Yes. International clients doing business in the United States are required to open a local, company bank account in the United States.
If I am doing my own bookkeeping, why do I need your services?
Accountants and professional bookkeepers will help you to avoid nasty, unintended consequences by maintaining and interpreting your data with financial reports and projections, monthly balance sheets, detailed general ledgers, and consultation and tax advice throughout the year. This helps to ensure that measures are implemented to allow you to stay abreast of changing tax laws to help ensure a maximum after-tax, net profit.
Why do I need to use a CPA?
Only a duly-licensed CPA may issue an independent accounting letter to verify the validity of your company’s financial records and practices. A CPA brings education and expertise and provides the credibility that your records will need if ever brought under government scrutiny.
Can I pay myself without an official payroll?
C-type and S-type corporations are required by law to maintain a payroll for all employees. Among other reasons, this is necessary for calculating withholding taxes and Social Security and Medicare payments. The other structures allow owners to receive a draw if income is available. Taxes, Social Security and Medicare are calculated on the individual’s federal and state tax forms. These individuals must file quarterly, estimated income taxes as they are not subject to withholding.
It is especially important in LLCs, partnerships and proprietorships to avoid “co-mingling” of business and personal funds and accounts. In other words, business funds should be used for business purposes only and personal funds should be used for personal purposes only. How a business owner pays themselves, therefore, must be consistent and accurately reported.
What is the difference between statements and receipts?
Businesses pay for goods and services based on invoices. Therefore, all invoices should be retained and preserved. A statement is a summary of outstanding invoices that are due and payable. Although you may pay the entire amount of the statement, your records must reflect which invoices are included in that payment. For verification purposes, invoices should always be matched to statements and filed together once payment is made.
Why do I need an Apostille and what does it do for me?
An Apostille is required for legal transactions where a document from one country must be presented in another as part of a legal process. It assures the country of presentation that the signatures on the document and the signatures of those who have verified the documents are authentic. The essential benefits of an Apostille are to protect against fraud and to eliminate unnecessary red tape.
Why does my document require Embassy Legalization?
When a country is not party to The Hague Convention (which developed and uses the Apostille method of authentication), your documents must be authorized by the in-country embassy or consulate of the country of intended use for final legalization.
Can you help me obtain an Apostille in all 50 states?