Starting a business can be overwhelming. We know. We’ve seen it countless times over the years. If you’re like most entrepreneurs, you likely have innumerable questions churning through your mind, especially if you’ve never started a business before. You don’t have to try to answer those questions alone (in fact, you shouldn’t try to answer those questions alone). A knowledgeable attorney can help you through the process and support you in forming a business with a solid foundation for growth, protection, and unrivaled opportunities.
Types of Businesses
You have several choices regarding your business structure, each with its own benefits and drawbacks. There are LLCs, partnerships, corporations, and more. Determining the proper business structure for your specific needs should always be discussed with a trusted team of professionals, including your attorney and accountant. They’ll ensure you make the best decision based on your goals and circumstances.
What is a Corporation?
You may think corporations are just for big, multinational companies, but incorporating your business can open up a world of opportunities for both small startups and large enterprises alike. Fundamentally, a corporation is a legal entity separate from its owners. What does that mean exactly? The corporation can enter contracts, own property, and sue (or be sued) as a person would. Since it’s a separate legal entity from its owners, a corporation can also pay taxes, enter agreements, and borrow money. And, unlike an LLC, a corporation is owned by shareholders.
Types of Corporations
There are various types of corporations, each with different benefits. Your corporation type will depend on various factors, including your business’s size, goals, taxation preferences, and long-term vision. It’s crucial to consult with your attorney and accountant to determine which type of corporation best suits your unique situation.
C Corporations, or “C Corps,” are the most common type of corporation. They have a separate legal existence from their owners, meaning the corporation can enter into contracts, sue or be sued, and pay taxes on its profits. C Corporations can also issue multiple classes of stock, making raising capital from investors easier.
- S Corporations are similar to C Corporations in that they are separate legal entities from their owners. However, S Corporations are taxed differently than C Corporations. With an S Corp, the corporation does not pay taxes on its profits; instead, those profits pass through to the shareholders’ personal taxes.
- Nonprofit Corporations are organized for charitable, educational, religious, or scientific purposes. These corporations are exempt from paying taxes on their income, and donations to nonprofit corporations are often tax-deductible for the donor.
Advantages of Corporations
Personal Liability Protection
Starting a business is an exciting endeavor, but it comes with risks. The last thing you want is for your personal assets to be at stake if something goes wrong. Since a corporation is a completely separate entity from its owners/shareholders, the owners are typically not personally liable for the debts and obligations of the corporation. If the corporation goes bankrupt or gets sued, your personal savings, property, and investments usually remain safe and sound.
Access to Capital
Every entrepreneur dreams of taking their business to new heights. But sometimes dreams require financial fuel. That’s where corporations have a distinct advantage. By incorporating your company, you open doors to new funding opportunities. Because corporations can issue stock, they can raise money from investors in a way that other types of businesses cannot, propelling your business forward like never before.
Business Security & Continuity
If you’re passionate about leaving a lasting impact through your business, incorporating may be the best choice. Unlike partnerships or sole proprietorships, which may dissolve if one of the owners leaves the business or passes away, corporations can outlive any individual. Having a corporation ensures the company can continue to operate and generate revenue, even in the face of unexpected challenges or changes, preserving your hard work and laying the foundation for a lasting legacy.
Tax Benefits
Corporations offer several tax advantages that help businesses save money, but every business situation is unique, and the tax implications can vary widely. We urge you to have a detailed conversation with your accountant about how incorporating your business can affect your taxes. An accountant can help you make informed decisions to propel your business toward financial success.
Let Us Help You Incorporate and Reap the Benefits of a Corporation
Starting a business is an exciting journey, but it’s critical to lay the foundation properly, and you should carefully consider all options available before making a decision.
If you’re interested in learning more about the advantages of corporations, or if you’re ready to start incorporating your business, we encourage you to reach out to our team of experienced attorneys. At McMillan Metro, we’ll work with you and your accountant to help you navigate the complex legal landscape of forming and running a corporation. Contact us today to learn how we can help you on your journey to success.
If you’re interested in learning more about the advantages of corporations, or if you’re ready to start incorporating your business, we encourage you to reach out to our team of experienced attorneys. At McMillan Metro, we’ll work with you and your accountant to help you navigate the complex legal landscape of forming and running a corporation. Contact us today to learn how we can help you on your journey to success.