Order now by calling our Incorporation Specialists at 213 624-8697 or by using our online order form.
TYPES OF CORPORATIONS
Anyone who operates a business, alone or with others, may incorporate. This is also true for anyone or any group engaged in religious, civil, non-profit or charitable endeavors. You do not have to be a business giant to be able to have the financial and other benefits of operating a corporation.
Given the right circumstances, the owner(s) of a business of any size can benefit from incorporating.
Before deciding which type of corporation best suits your business needs, we recommend that you consult with your legal or financial advisors.
The Law Offices of David M Miyoshi can assist you in determining the best type of corporation to suit your needs.
Click on the title to learn more about the different types of corporations:
General Corporation
This is the most common corporate structure. The corporation is a separate legal entity that is owned by stockholders. A general corporation may have an unlimited number of stockholders that, due to the separate legal nature of the corporation, are protected from the creditors of the business. A stockholder’s personal liability is usually limited to the amount of investment in the corporation and no more.
Advantages
・Owners’ personal assets are protected from business debt and liability
・Corporations have unlimited life extending beyond the illness or death of the owners
・Tax-free benefits such as insurance, travel, and retirement plan deductions
・Transfer of ownership facilitated by sale of stock
・Change of ownership need not affect management
・Easier to raise capital through sale of stocks and bonds
Disadvantages
More expensive to form than proprietorship or partnerships. More legal formality
More state and federal rules and regulations
Close Corporation
There are a few minor, but significant, differences between general corporations and close corporations. In most states where they are recognized, close corporations are limited to 30 to 50 stockholders. In addition, many close corporation statutes require that the directors of a close corporation must first offer the shares to existing stockholders before selling to new shareholders.
This type of corporation is particularly well suited for a group of individuals who will own the corporation with some members actively involved in the management and other members only involved on a limited or indirect level.
S Corporation
With the Tax Reform Act of 1986, the S Corporation became a highly desirable entity for corporate tax purposes. An S Corporation is not really a different type of corporation. It is a special tax designation applied for and granted by the IRS to corporations that have already been formed. Many entrepreneurs and small business owners are partial to the S Corporation because it combines many of the advantages of a sole proprietorship, partnership and the corporate forms of business structure.
S Corporations have the same basic advantages and disadvantages of general or close corporation with the added benefit of the S Corporation special tax provisions. When a standard corporation (general, close or professional) makes a profit, it pays a federal corporate income tax on the profit. If the company declares a dividend, the shareholders must report the dividend as personal income and pay more taxes.
S Corporations avoid this "double taxation" (once at the corporate level and again at the personal level) because all income or loss is reported only once on the personal tax returns of the shareholders. However, like standard corporations (and unlike some partnerships), the S Corporation shareholders are exempt from personal liability for business debt.
S Corporation Restrictions
To elect S Corporation status, your corporation must meet specific guidelines. As a result of the 1996 Tax Law, which became effective January 1, 1997, many of these qualifying guidelines have been changed. A few of these changes are noted below:
Prior to the 1996 Tax Law, the maximum number of shareholders was 35. The maximum number of shareholders for an S Corporation has been increased to 75.
Previously, S Corporation ownership was limited to individuals, estates, and certain trusts. Under the new law, stock of an S Corporation may be held by a new "electing small business trust." All beneficiaries of the trust must be individuals or estates, except that charitable organizations may hold limited interests. Interests in the trust must be acquired by gift or bequest — not by purchase. Each potential current beneficiary of the trust is counted towards the 75 shareholder limit on S Corporation shareholders.
S Corporations are now allowed to own 80 percent or more of the stock of a regular C corporation, which may elect to file a consolidated return with other affiliated regular C corporations. The S Corporation itself may not join in that election. In addition, an S Corporation is now allowed to own a "qualified subchapter S subsidiary." The parent S Corporation must own 100 percent of the stock of the subsidiary.
Qualified retirement plans or Section 50 1(c)(3) charitable organizations may now be shareholders in S Corporations.
All S Corporations must have shareholders who are citizens or residents of the United States. Nonresident aliens cannot be shareholders.
S Corporations may only issue one class of stock.
No more than 25 percent of the gross corporate income may be derived from passive income.
An S Corporation can generally provide employee benefits and deferred compensation plans.
S Corporations eliminate the problems faced by standard corporations whose shareholder-employees might be subject to IRS claims of excessive compensation.
Not all domestic general business corporations are eligible for S Corporation status. These exclusions include:
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A financial institution that is a bank;
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An insurance company taxed under Subchapter L;
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Domestic International Sales Corporation (DISC); or
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Certain affiliated groups of corporations.
Keep in mind, these lists of qualifying S Corporation aspects are not all-inclusive. In addition, there are specific circumstances in which an S Corporation may owe income tax. For more detailed information about these changes and other aspects regarding S Corporation status, contact your accountant, attorney or local IRS office.
How to File as an S Corporation
To become an S Corporation, you must know the mechanics of filing for this special tax status. Your first step is to form a general, close or professional corporation in the state of your choice. Second, you must obtain the formal consent of the corporation’s shareholders. This consent should be noted in the corporation’s minutes. Once the filing is approved, your company must complete Form 2553, Election by a Small Business Corporation. This form must be filed with the appropriate IRS office for your region Please consult the IRS’ instructions for Form 2553 to determine your proper deadline for completing and submitting this form.
The Law Offices of David M Miyoshi can assist you in preparing and submitting the IRS Form 2553 as part of your incorporating process. Please see our online order form for additional details.
Limited Liability Company (LLC)
LLCs have long been a traditional form of business structure in Europe and Latin America. LLCs were first introduced in the United States by the state of Wyoming in 1977 and authorized for pass-through taxation (similar to partnerships and S Corporations) by the IRS in 1988. With the recent inclusion of Hawaii, all 50 states and Washington, D.C. have now adopted some form of LLC legislation for both domestic and foreign (out of state) limited liability companies.
Many business professionals believe LLCs present a superior alternative to corporations and partnerships because LLCs combine many of the advantages of both. With an LLC, the owners can have the corporate liability protection for their personal assets from business debt as well as the tax advantages of partnerships or S Corporations. It is similar to an S Corporation without the IRS’ restrictions.
Advantages
・Protection of person assets from business debt
・Profits/losses pass through to personal income tax returns of the owners
・Great flexibility in management and organization of the business
・LLCs do not have the ownership restrictions of S Corporations making them ideal business structures for foreign investors
Disadvantages
LLCs often have a limited life (not to exceed 30 years in many states) Some states require at least 2 members to form an LLC, and LLCs are not corporations and therefore do not have stock — and the benefits of stock ownership and sales.
As with the S Corporation listing, these lists are not inclusive. For more detailed information, please be sure to speak with the Law offices of David M Miyoshi or your financial advisor.
Important Note Regarding the Federal Taxation of LLCs:
Before January 1, 1997, the Internal Revenue Service determined whether a limited liability company would be taxed "like a partnership" or "like a corporation" by analyzing its legal structure or by requiring the members to elect the tax status on a special form. Effective January 1, 1997, the IRS has simplified this process.
Pursuant to these new IRS regulations, if a limited liability company has satisfied IRS requirements, it can be treated as a partnership for federal tax purposes. As such, LLCs are required to file the same federal tax forms as partnerships and take advantage of the same benefits. However, this is still a highly technical area, and if you require further information, it is recommended that you communicate with the Internal Revenue Service or consult a competent professional such as a qualified tax accountant or attorney.
Non-Profit Tax Exempt Organization
A non profit tax exempt organization is generally an organization formed for charitable and other non profit purposes. Such an organization has substantial tax benefits under both U.S. Federal and state regulations. The charitable purposes of these organizations would include relief of the poor and distressed or of the underprivileged; advancement of religion; advancement of education or science; erection or maintenance of public buildings, monuments, or works; lessening of the burdens of Government; and promotion of social welfare by organizations designed to accomplish any of the above purposes, or (i) to lessen neighborhood tensions; (ii) to eliminate prejudice and discrimination; (iii) to defend human and civil rights; or (iv) to combat community deterioration and juvenile delinquency. The focus of organization’s purpose must be to benefit the community or society as a whole, not just the organization’s members and their families or other select individuals. Enumerated purposes under U.S. Code §501(c)(3) include: religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals.
Advantages
・No Federal or state income taxes
・Ability to raise large amounts of funds
・Same advantages as regular corporations
Disadvantages
More expensive to form than proprietorship or partnerships. More legal formality
Much more Federal and state rules and regulations
BENEFITS OF INCORPORATING
Limited Liability
When a corporation is formed, a new business entity is created which is separate and apart from its owners in the eyes of the law. This means that the owners or shareholders of a corporation can shield their personal assets from business debts or other claims against the corporation. Neither the house, the car, nor any other personal holdings of the individual owners are exposed to risk. In most cases, the owners risk only their capital investment in the corporation.
Tax Advantages
A corporation offers major tax advantages over the structures such as sole proprietorships or partnerships. In a corporation, health insurance, travel and entertainment expenses can often be 100% tax deductible for the owners. The tax rate for corporations is often lower than for individuals. Retirement plans, profit sharing and stock option plans can be established to lower the corporations’ taxable income, and these plans can be structured in a way which is beneficial to the owners’ personal finances.
Ease in Raising Capital
Corporations can raise capital more easily than other business structures through the issuance and sale of stock. Investors are attracted to corporations for many of the same reasons mentioned above, especially limited liability. Banks and venture capitalists are often wary of an investment which could make them liable for lawsuits and damages against the company, but investment in a corporation does not usually carry this responsibility.
Ease of Transfer of Ownership
Ownership of a corporation is determined through the stock holdings. Ownership interests may be transferred easily, without disrupting the activities of the business, through the transfer and sale of stock.
Prestige and Credibility
If your company does not have a professional image, it doesn’t stand a chance to compete. When a company is incorporated, it sends a signal to customers, investors and competitors that its owners are serious and professional. Investors will be interested, customers will be at ease and competitors will be nervous.
Anonymity
In a sole proprietorship or partnership, the owner of the business is publicly recorded as such. However, corporations can protect their owners from publicity. Only the officers and in some cases the directors of a corporation are a matter of public record; not the stockholders. Therefore, incorporation is an option for an individual or group which wants to run a small business without public knowledge of their involvement. Anonymity can also be an attractive feature for potential investors.
Perpetual Existence
A corporation is the most enduring of all business structures. If a sole proprietor or partner in a partnership should die, the business will most likely end or become mired in legal entanglements. Because a corporation is a business entity separate and apart from its stockholders, it outlives the individuals who own it.
PROCEDURE FOR FORMING CORPORATION
1. Choose the Type of Business Structure
The most common types of corporate or business entities are:
General Business Corporation, Subchapter S Corporation and Limited Liability Company. If these do not suit your needs, call our Law Office and we will be happy to discuss the structure and requirements of other entities, such as the close corporation or the non-profit corporation.
2. Choose a State of Incorporation
Our Law Office can incorporate your company in any state, regardless of where you plan to conduct business. There is a filing fee for forming a corporation or a Limited Liability Company in each state. Some states have particularly attractive laws for corporations, and our Law Office can provide you with information on the advantages of incorporating in certain states.
3. Choose a Name For Your Company
The name you choose must include one of the following endings: Incorporated, Corporation, Company, Limited or Association. An abbreviation of any of these words is also acceptable. In order for your corporate name to be accepted by the Secretary of State, it must not be the same, or so similar as to cause confusion, as any existing business in the same state. Because so many new businesses are formed every day, it is important that you reserve your name as soon as possible. Our Law Office can check on the availability of your name and, if available, reserve it in the state of your choice for 60 days while you are finalizing your incorporation plans.
4. Choose a Registered Agent
Every state requires that corporations and LLCs designate an Agent to receive important notices and tax information from that state, as well as to receive suit papers. The Registered Agent must be located at a street address in that state. If you live in the state in which you are incorporating, you can save a great deal of money by serving as your own Registered Agent. If not, Our Law Office and our network of affiliates are able to serve as your Registered Agent in any state.
5. Fill Out the Company Information Form
Complete the Company Information Form. Your Articles of Incorporation will be sent to the Secretary of State the same day. In many states, your corporate charter will be issued within 24 hours. Other states’ processing time is up to four weeks. Our Law Office will forward your certificate of incorporation when it is issued by the state.
6. Hold the Appropriate Meetings
After your corporate charter has been issued by the Secretary of State, your company must hold the first Board of Directors meeting, during which the directors and officers are elected or appointed, bylaws are adopted and other corporate business is addressed.
OTHER CORPORATION RELATED SERVICES
In addition to forming your corporation, we are able to assist your company in several other areas, efficiently and inexpensively.
Registered Agent Services
We have affiliates throughout the U.S. who can serve as Registered Agent in every U.S. jurisdiction. Contact us through email to inquire of our service fees in your state.
Qualification
We can prepare and file all of the necessary documentation to qualify your corporation or Limited Liability Company to do business in any state.
Federal Tax Identification Number
Every entity in the U.S. must have a Federal Tax Identification Number. We can save you tedium and paperwork by applying to the IRS for the number on your behalf.
Subchapter S Election
In order to form a Subchapter S Corporation, you must file an application with the IRS within 75 days of forming your General or Close Corporation. We can complete and file the application with the IRS on your behalf.
COMMERCIAL LAW
Our law office can provide negotiation and drafting services in the following types of commercial law transactions:
Mergers & Acquisitions
Resolving Shareholder disputes (majority and minority shareholders)
Director and Officer Liability issues
Partnership disputes
Employment disputes
Contract drafting
Contract review
Contract negotiation
Breach of contract
Business Purchase
Business Sale
Commercial Leases – drafting, review, negotiation
Trademarks — searching, filing, litigation
REAL ESTATE LAW
Our law offices can provide negotiation and drafting services in the following types of real estate transactions:
Nondisclosure suits
Real Estate Appeals
Commission disputes
Title Disputes
Property Exchanges
Property line disputes
Boundary disputes
General easements
Prescriptive Easements
Adverse Possession
Commercial Leases – Drafting, Review, and Negotiation
Residential Leases – Drafting, Review, and Negotiation
Unlawful Detainer actions, 3-day Notices, 30-day Notices
Residential evictions
All Landlord matters
Commercial property transactions
Property Purchase or Sale document review
Lender Negotiations
Eminent Domain
Inverse Condemnation
Homeowner’s Associations
Foreclosures
Liens
Deeds
Trust deeds
Options
1. What does the Law Offices of David M Miyoshi do?
The Law Offices of David M Miyoshi provides full incorporation services both in the US and in offshore jurisdictions. We offer a wide range of services including:
・Name search and reservation
・Preparation and filing of Articles of Incorporation in all 50 states
・Formation of Limited Liability Companies in all 50 states
・All documents in Japanese and English
・Registered Agent office and address
・Receive and forward service of process
・Forward official federal and state mail
・Corporate organizers, which include: Corporate minute book, seal and stock certificates
・IRS form SS-4 for your Tax ID number
・File qualification documents in all 50 states
・U.S. trademark and patent searches
2. What are the benefits to incorporating?
The benefits to incorporating are:
Limited Liability
When a corporation is formed, a new business entity is created which is separate and apart from its owners in the eyes of the law. This means that the owners or shareholders of a corporation can shield their personal assets from business debts or other claims against the corporation. Neither the house, the car, nor any other personal holdings of the individual owners are exposed to risk. In most cases, the owners risk only their capital investment in the corporation.
Tax Advantages
A corporation offers major tax advantages over the structures such as sole proprietorships or partnerships. In a corporation, health insurance, travel and entertainment expenses can often be 100% tax deductible for the owners. The tax rate for corporations is often lower than for individuals. Retirement plans, profit sharing and stock option plans can be established to lower the corporations’ taxable income, and these plans can be structured in a way which is beneficial to the owners’ personal finances.
Ease in Raising Capital
Corporations can raise capital more easily than other business structures through the issuance and sale of stock. Investors are attracted to corporations for many of the same reasons mentioned above–especially limited liability. Banks and venture capitalists are often wary of an investment which could make them liable for lawsuits and damages against the company, but investment in a corporation does not usually carry this responsibility.
Ease of Transfer of Ownership
Ownership of a corporation is determined through the stock holdings. Ownership interests may be transferred easily, without disrupting the activities of the business, through the transfer and sale of stock.
Prestige and Credibility
If your company does not have a professional image, it doesn’t stand a chance to compete. When a company is incorpoe2.jd, it sends a signal to customers, investors and competitors that its owners are serious and professional. Investors will be interested, customers will be at ease and competitors will be nervous.
Anonymity
In a sole proprietorship or partnership, the owner of the business is publicly recorded as such. However, corporations can protect their owners from publicity. Only the officers and in some cases the directors of a corporation are a matter of public record; not the stockholders. Therefore, incorporation is an option for an individual or group which wants to run a small business without public knowledge of their involvement. Anonymity can also be an attractive feature for potential investors.
Perpetual Existence
A corporation is the most enduring of all business structures. If a sole proprietor or partner in a partnership should die, the business will most likely end or become mired in legal entanglements. Because a corporation is a business entity separate and apart from its stockholders, it outlives the individuals who own it.
3. What are the disadvantages to incorporating?
The disadvantages to incorporating are:
Record Keeping
Maintaining a corporation requires more paperwork and record keeping than sole proprietorships. Each individual state has its own legal procedures and regulations for forming and maintaining a corporation in good standing.
Costs
Also, it is usually more costly to set up a corporation than any of the other major business structures. If you incorporate with a lawyer there are lawyer fees but with that you get the personal guidance and attention to make sure it is done correctly.
Not enough profit
If the profit from the business is not significant there may not be enough income to take advantage of the tax and other benefits of a corporation.
4. Where should I incorporate?
This questions deals with legal and financial issues. It is not the purpose of this web page to provide legal or tax advice. Before deciding to form a corporation, you should consult with an attorney such as the Law Offices of David M Miyoshi or an accountant to determine if a corporate structure is best for your business, and in which state to form your corporation. Some accountants and lawyers recommend forming a Delaware corporation in all cases. It is true that up until a few years ago, Delaware corporations did have significant tax and other advantages. This is no longer as true as it used to be. Nor may it be advantageous to form a corporation in Nevada, Wyoming or any other state in America if you do not conduct business there. The best advice may be to form a corporation in the state where you plan to conduct business. It will be far less complicated and more cost-effective in the long run. Listed below are some of the reasons why Delaware attracts both large and small businesses:
5. What are the advantages of a Delaware or Nevada corporation?
Anyone may form a corporation in Delaware without ever having to visit the state. Delaware has kept its fees low and is one of the friendliest states to corporations. Indeed, over 50% of all companies listed on the New York Stock Exchange are Delaware Corporations.
・Names and addresses of initial directors need not be listed in public records.
・The cost to form a Delaware corporation is among the lowest in the nation. The annual $50 Franchise Tax compares favorably with that of most other states.
・Delaware maintains a separate court system for business, called the "Court of Chancery." If legal matters arise involving a trial in Delaware, there is an established record of business decisions.
・No minimum capital is required to organize the corporation and there is no need to have a bank account in Delaware.
・Just one person can hold all the offices of the corporation: President, Vice President, Secretary and Treasurer.
・There is no state corporate income tax on Delaware corporations that do not operate within the state.
・Shares of stock owned by persons outside of Delaware are not subject to Delaware personal income tax.
・There is no Delaware inheritance tax levied on stock held by non-residents.
Nevada is becoming increasingly friendly to corporations with its privacy and liability protection status. Numerous companies are relocating their business entities to Nevada in order to receive the numerous tax benefits. Listed below are some of the reasons why Nevada is attracting more businesses each day:
・No state corporate tax on profits
・No state annual franchise tax
・No personal income tax
・Stockholders are not public record which permits complete anonymity
・Just one person can hold all the offices of the corporation: President, Vice President, Secretary and Treasurer.
・Stockholders, directors and officers need not be residents of Nevada
6. Can my Delaware corporation do business in my home state and other states besides Delaware?
Yes. In fact, nearly half of the corporations listed on the New York Stock Exchange are Delaware corporations. Many of these corporations conduct business throughout the U.S. and abroad. They must, of course, conform to the laws of any jurisdiction they enter. Many states require that any foreign (out of state) corporation qualify to do business in their state. The Law Offices of David M Miyoshi can assist you in qualifying your corporation or LLC in any state you choose.
7. Are there any special requirements for selecting a corporate name?
Yes. The corporate name you choose must contain a valid corporate indicator for the state in which you are incorporating. Most every state will accept one of the following identifiers or a suitable abbreviation: Incorporated, Corporation, Company, Limited or Co., Ltd.. The regulations affecting corporations do vary from state to state. In addition, your corporate name must not match or be too similar to the name of an existing company registered in your desired state. The Law Offices of David M Miyoshi can assist you in determining an acceptable corporate indicator for your state.
8. How do I find out if my preferred corporate name is available?
The Law Offices of David m Miyoshi can search and reserve a name for you within 24-48 hours for most states. Please note, many states require that your corporate name be unique and not deceptively similar to the name of an existing corporation in that state. For this and to ensure your filing is completed as quickly as possible, it is a good idea to submit at least one alternate name with your order.
11. How long will it take before my business is officially incorporated?
Your corporate documents in most other states will be filed with the appropriate state agency within just 2-3 days. As soon as the official documents are released by the state, we forward them to you via your desired method of delivery.
12. When will I receive my corporate kit?
Your corporate kit will be shipped to you via express courier after official verification of filing has been returned by your state. This time frame varies from state to state, but in most cases, you will receive your corporate kit within 5-7 business days from the date of incorporation. Your copy of the filed Articles of Incorporation arrive separately.
13. When will I receive my Articles of Incorporation?
Your copy of the filed Articles of Incorporation will arrive separately from the corporate kit. Generally, we can file your Articles of Incorporation and have them in your hands in as little as I 0 business days. Foreign business formations require a somewhat longer time to complete. If you select our Express service, within just 24 hours of receiving documentation from your state of incorporation we will send you the filed Articles of Incorporation and your selected Corporate Kit by overnight delivery.
14. What is a Registered Agent?
Most states require that corporations maintain a designated person or entity (a resident of the state of incorporation) to be responsible for receiving vital legal and tax documents on behalf of the corporation. An "agent" of the corporation "registered" with the particular state of incorporation provides this service – thus the term "Registered Agent." Service performed by the Registered Agent include:
・Provide a local address for service of process in the state of incorporation.
・Forward official state and federal mail.
・Forward state franchise tax or annual reports when required.
・Provide additional buffer between the state and your business allowing you greater personal anonymity.
・All service of process is sent to you promptly for your immediate attention.
・Our fees for hiring a Registered Agent vary with the state or international jurisdiction.
15. What is a Corporate Kit and do I need one?
When you form your new corporation, it is essential to keep accurate records. Our Corporate Kits are designed and intended to make your day-to-day corporate procedures an easy task. Here is what’s included in the kit:
・Corporate seal
・Minute book
・20 stock certificates imprinted with corporate name
・Stock transfer ledger
・Sample forms for minutes and bylaws
16. Can I keep the same bank account or do I need to open a new one once I’m incorporated?
It is necessary to open a new bank account for your new entity. Do not commingle cash. Always operate your corporation as a separate entity distinct from yourself in every respect. By using the same bank account for personal and corporate purposes, you pierce your corporate veil and allow creditors to challenge the validity of your corporation and attack your personal assets.
18. Which Types of Business Entities Are Available?
There are several types of business entities which offer the benefits of incorporation. We can explain the features of each one and set up the entity best suited to your business needs. The following are the most widely used business structures:
General Business Corporation
Also known as the C corporation, this is the most formal corporate structure and is commonly used for both large and small companies. The stockholders are protected through limited liability and risk only their capital investment in the corporation. The General Business or C corporation can have an unlimited number of stockholders and can raise capital by selling stock on public exchanges. The General Business corporation also offers perpetual existence, or life beyond that of its original owners.
Subchapter S Corporation
A corporation with Subchapter S status avoids the burden of federal corporate income tax. The IRS allows any tax obligations on the corporation’s income tax to be "passed through" to the personal income tax returns of the stockholders. The stockholders, however, still enjoy limited liability. In order to elect Subchapter S status, one must form a General Business corporation and then apply to the IRS for S status within 75 days of incorporation. S corporations must be formed in the United States and all stockholders must be U.S. citizens.
Limited Liability Company (LLC)
The LLC is an alternative business entity that offers many of the same advantages as the corporation. Owners of the LLC are called members. Members enjoy both the limited liability of the corporation and the tax advantages of the partnership or S Corporation, in that LLCs do not pay federal income tax. All business income or losses are reported on the personal income tax returns of the members. There is no double taxation on the company’s income. This structure is
particularly beneficial to family businesses, professional organizations, non-U.S. residents and foreign businesses. In most states, two members are required in order to form an LLC. Also, the LLC does not have perpetual existence, with a limited life of up to 30 years in most states.
In addition to these three most common business structures, there are alternatives for new companies, such as the close corporation or the non-profit corporation. We are available to discuss any type of corporate structure and answer any of your questions as you determine which type of entity is best for you.
19. What Is the Advantage of the LLC Over the Corporation?
A corporation is taxed at the corporate level and then profits are distributed to the owners. The profits are then taxed as the owners’ personal income. LLC income is only taxed once, because income or loss is passed through to the individual income tax returns of the owners. LLCs are also easy to form and require little record keeping. The Articles of Organization are simple and members write the Operating Agreement which determines the policies of the company and can be modified by the members at any time, without amending the Articles.
20. What Is the Difference Between an LLC and a Subchapter S Corporation?
Both structures offer limited liability and "pass-through" taxation, but the LLC is much more flexible. In an S corporation, the owner of 25% of the stock is
responsible for 25% of the taxes owed on the corporation’s income. LLC members, however, can divide income and tax liability however they wish, regardless of their percentage of ownership.
Furthermore, Subchapter S corporations are limited to 75 shareholders and U.S. citizenship is required for ownership. LLCs are not restricted by either of these requirements.
21. If I Incorporate in One State, Can I Do Business in Others?
Yes! No matter what state you incorporate in, you can formally qualify to do business in other states. Many small businesses incorporate in Delaware or Nevada, but conduct all of their business in another state. In order to qualify to do business in another state, your corporation must apply for a Certificate of Authority to Transact Business in that state, pay the state filing fees, and appoint a Registered Agent for that state. We can prepare and file your paperwork for any state and serve as Registered Agent through our affiliates.
22. What Happens After I Incorporate?
After your Articles of Incorporation are filed with the state, you must hold your first Board of Directors meeting. At this meeting, you issue stock to the stockholders. If you have a Corporate Kit, you will be able to distribute the actual stock certificates. Then the Board of Directors will appoint the officers of the corporation. Officers are the President, Vice President, Secretary and Treasurer, who manage the daily operation of the company. In some states, one person can serve as all of the directors and officers.
23. What Is a Federal Tax ID Number?
Most corporations must obtain a federal tax identification number or IRS Employer Identification Number (EIN). This number is required if the company plans to open a corporate bank account or hire employees. Many documents and tax returns require an EIN. In order to obtain the number, your corporation must file Form #SS-4 with the IRS. We can handle this filing for you and obtain the number for you in a few business days.
24. What Type of Stock Should My Corporation Issue? Common Stock or Preferred Stock?
The vast majority of corporations issue only common stock. Common stock carries voting rights of one vote per share. Preferred stock usually does not carry voting rights, but preferred stockholders are entitled to receive dividends before holders of common stock.
25. Par Value or No Par Value?
All classes of stock can have a par value, which is a set value per share under which it should not be sold. Often a stock is sold for more than its par value. If a stock has no par, it can be sold for any price. This gives more flexibility to the corporation when it is trying to raise capital. About 95% of corporations issue stock with no par value.
26. What can The Law Offices of David M Miyoshi do to kelp me file an international corporation (or bank)?
The Law Offices of David M Miyoshi has developed strategic alliances with specialized international incorporators throughout the world enabling us to file your international company in almost any jurisdiction. Our international network offers you the most cost efficient and expedient services available, including the availability of ready-made shelf companies in major worldwide jurisdictions.
We also provide other special international services including notarization, apostilles and translation services. If you require an offshore or international company, The Law Offices of David M Miyoshi can assist you. Please be aware that most international requests will take longer than 24 hours to complete and may require additional information to register in the country of your choice.
27. What are the facts about Non-Profit Tax Exempt Organizations?
There are some 1.1 million nonprofits currently in the United States. The growth rate for nonprofits is approximately 3% a year and within the next five years nonprofits will total more than 1.4 million organizations. The nonprofit market is America’s third largest business, generating more than $380 billion in purchases of goods and services. Nonprofits represent about 10% of all businesses in the U.S. Of the total number of charities in the country, there are 599,745 Sec. 501(c)(3) organizations, which actively raise $124 billion a year in charitable contributions from individuals, corporations and foundations. Of these organizations, approximately 2,700 raise more than $50 million a year. These same 501(c)(3) groups spend $200 billion annually to purchase goods and services each year. 47% of nonprofits use the mails to raise money. Appeals from charities account for one out of every four pieces of mail moving through the U.S. Postal Service. Nonprofit bulk mail constitutes one-third of all bulk mail delivered by the Post Office.
Of the 599,745 501(c)(3) organizations that raise money, there are approximately 2,700 that raise more than $50 million a year. These organizations tend to be colleges and universities, hospitals, large health and social service agencies (such as American Lung and American Red Cross) and religious organizations (Catholic Charities, Salvation Army). These organizations have various staff functions for each type of fundraising (annual giving, planned gifts, capital campaigns, direct mail) and purchasing power is decentralized. Organizations that raise $10-$49.9 million number about 6,600 and include hospitals, educational organizations and social welfare agencies. These organizations typically have various staffs to handle different development functions, and purchasing power is decentralized.
Some 6,200 organizations raise $5-$9.9 million and include more social and human service organizations. They include education and health-related groups, and purchasing power is more centralized with the development office usually having purchasing power for the various development functions.
Further down the revenue scale the numbers increase dramatically. There are more than 42,500 organizations that raise $1 -$4.9 million a year. These include education, health, religious and more social welfare organizations. Purchasing power is much more centralized, with the development office having complete say in goods and services purchased. Usually board approval is required for capital purchases above $5,000 for items not budgeted for outlays.
More than 68,000 organizations raise between $500,000 and $999,999, and there are more social service organizations in this group. Development office function is often included in the executive director’s job responsibilities, and purchasing tends to be total centralized through one or two people.
There are more than 275,500 organizations that raise less than $500,000, and these agencies tend to have smaller budgets. The executive director is also responsible for raising money, and board approval is required for expenditures of more than $2,500.