What does it even mean to start a business? How do I do it right? Should I be a sole proprietor, an LLC, a corporation? We’re going to talk about 4 types of entities:

State primarily covers limiting your liability. And the federal (specifically the IRS) primarily covers taxes. And common sense covers your assets among other things.

For the third part of this blog, we are going to talk about Corporations.

Corporations (both S-corps and C-corps)

Corporations are another way for you to have limited liability as a business. However, these entities were created long before LLCs, and they have many more formalities. The owners are called shareholders, who elect a board of directors to direct the company, who then appoint officers to run the day to day decisions of the company. There are bylaws and shareholder agreements and corporate resolutions.But all of these are required to respect the mystical ‘corporate veil’ that protects you from personal liability.

The default taxation of a corporation is double taxed, once when the corporation receives the money and second time when that money is distributed to the shareholders.However, you can elect to be taxed under subchapter S of chapter 26 of the United States Code. Thus, the term S-Corp (double taxation is found under subchapter C for c-corps). This means pass-through taxation. Pass-through means that it is just taxed once, similar to partnerships (because it passes through your business straight to you). However, there are techniques to avoid some of the self-employment tax through your S-Corp. But not all businesses are right for S-corp status. Cash-flow, pass-through taxation, and limited liability all must be considered.

Finally, let say that you want to be a non-profit because you want to help people or animals or the environment. Well that is a special type of corporation.After you have filed with the state of Indiana for your nonprofit corporation, you have limited liability. However, you do not yet have a tax-exempt status under section 501(c)(3) of Chapter 26 of the United States Code. To become a tax-exempt entity, where the company does not have to pay taxes on the money, you must ask the IRS through a lengthy application process.You must have a charitable purpose to receive this special tax-exempt status.

If you’re wondering about how it compares to an Limited Liability Company (LLC), check out http://iicarr.com/2018/04/13/recipe-for-an-entit…

And if you haven’t followed the corporate formalities required by the State, you could be liable as if you were a sole proprietor or partnership: http://iicarr.com/2018/03/26/entity-recipe-part-…

If you want to know whether a corporation is right for you, give me a call at 219-230-3600 or email at: Isaac@ccsklaw.com

About the author

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Isaac Isaiah Carr, JD MBA is founder, CEO, and business attorney of CCSK Law, a kingdom-driven law firm. Launched 5 years ago, CCSK Law grew from a single member firm to a 10 person team. His areas of focus include business formation and strategy, contract writing, sales, and corporate finance. Often referred to as an entrepreneur with a law degree, Isaac is able to offer business strategy utilizing creative solutions guided by legal and accounting principles that are then well executed in law. Experience in a variety of industries including real estate, hospitality, automotive, e-commerce, professional services, and healthcare. Successfully negotiated and closed multi-million-dollar transactions, ranging from $1.8M to $10M, with private investors, corporate leaders, and municipalities. Ultimately, he builds sustainable structures for systematic growth. Graduated from Valparaiso University Law School summa cum laude with his Juris Doctorate as well as the AACSB-accredited Valparaiso University School of Business with his Master’s in Business Administration. Passionate about education in all forms, Isaac is involved in the nonprofit organizations of SCORE, Neighbors’ Educational Opportunities (NEO) and New Vistas High School, ValpoNext, and Music Neighbors.


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