The decision to incorporate is not one that should be taken lightly by any business owner. It comes with several changes that the business needs to adopt, from formalizing business practices to filing for tax. This guide will discuss some of the business structures that need to be in place to ensure that your new corporation begins trading on a firm footing. A corporate attorney can help ensure a smooth process during this transition.
S Versus a C Corporation
An S corporation structure can often be more useful to smaller businesses that are just starting up, as its owners are only liable for their share of the tax liability of the corporation. C corporations on the other hand pay tax as a corporation, and then the owners are taxed again on their dividends. This is fine so long as the company makes reliable profits.
Smaller companies with fewer than 100 owners should rather consider electing to be an S corporation in their first year of operation. This does come with limitations; S corporations are only allowed a maximum of 100 shareholders and a single stock class, whereas for a C corp these categories are unlimited. If you decided that an S corp is for you – Form 2553 from the IRS (Internal Revenue Service) needs to be completed within 75 days from the date of incorporation.
Incorporation places few demands on personnel particulars; staff can be of any age, and directors don’t need to reside in Florida. You can operate your corporation from anywhere in the world. The one requirement is that there is at least one officer, director or incorporator. The owner or directors name does not need to be disclosed in the articles of incorporation, but the incorporator’s name does.
The corporation needs a registered agent who is basically the point of contact for the business and the government. The agent can’t be the corporation itself and needs to have a physical mailing address in Florida. It is responsible for receiving government, legal and taxation documents during business hours. A good example of an agent is a registered corporate Law Firm.
Articles of Incorporation
To form any kind of corporation you need a set of articles of incorporation. These include the name of your incorporator, how many shares the business are authorized and what exactly your business has been set up to do (i.e. its purpose). The articles of incorporation must be signed by the incorporator and agent.
Every year the new corporation must file an annual report with the Secretary of State so that its registration doesn’t fall dormant. The due date for this report is immediately after the date of incorporation. This is between January 1st and May 1st. There is a filing fee for the annual report, and if it is submitted late, an additional lateness penalty. Not filing a report can cause your corporation to be involuntarily dissolved.
What’s in a Name
Your corporation needs a name, and the main rule is that it contains the words, ‘Incorporated’, ‘Inc’, ‘Corporation’, ‘Corp’, ‘Company’ or ‘Co’. Other rules are that it cannot be misleading, for example, it can’t be ‘Electronics Repair Inc’ when you are actually a plumber. Also, it can’t be similar to other existing corporate entities.
Hopefully you now have a clearer picture on a few of the essential things needed to create a corporation. While you can do it yourself, it is usually better to trust the its establishment to a corporate attorney, as this will save you time and more importantly, money.