Frequently asked questions about U.S. incorporations
Why do businesses incorporate?
Businesses incorporate primarily for protection: protection of the owners of the company from the liabilities of the business. Both
corporations and limited liability companies legally separate the owners/investors of a company from their company's liabilities. Further,
incorporation of either a corporation or an LLC may provide tax benefits, prestige and/or name protection,as well as possibly making it
easier to set up health insurance, retirement plans and other benefits to owners and employees.
What is a Corporation?
A corporation is a legal entity that exists separately from its owners. Creation of a corporation occurs when properly
completed articles of incorporation (called a charter or certificate of incorporation in some states) are filed with the
proper state authority, and all fees are paid.
What is a Limited Liability Company?
The LLC is not a partnership or a corporation. It is a distinct business entity that offers an alternative to partnerships
and corporations by combining the corporate advantages of limited liability with the partnership advantage of
pass-through taxation.
What is a non-profit company?
A nonprofit corporation is a corporation that is formed pursuant to a different law than a standard for-profit
corporation. The corporation must be formed for some religious, charitable, educational, literary or scientific purpose.
While a standard business corporation is designed to benefit and generate a profit for its shareholders, nonprofit do
not have the profit motive. Nonprofit corporations are allowed to apply for tax-exempt status at both the federal and
state level.
Which type of business entity is better?
Each entity has its advantages and disadvantages, so which entity to choose depends on what the company intends
to do.
Should I incorporate in Delaware?
Whether a company should incorporate in depends on the size and intended activities of the company. A small
business that will only transact business from a single location will likely want to incorporate in its own State. This
way, there is only set of tax rules to worry about, no extra registered agent fees to pay, etc. A company that intends
to transact business in several States, or wants to prevent others from incorporating with the same name or that are
large and want to take advantage of the pro-business Delaware Court of Chancery, may prefer to incorporate in
Delaware.
Should I incorporate in my own State or somewhere else?
Generally, if a company is located in a single office in a single State, it is better off simply incorporating in that State,
and avoiding some of the extra complications of being incorporated elsewhere. As a company grows, it may need a
more complex structure. Good legal assistance is definitely recommended at that point.
If I trademark a name, can someone still incorporate with that name?
Since trade- and service-marks are kept on separate databases, owning a mark does not stop someone from
incorporating under that name. However, if someone does incorporate using a name that has been trademarked, then
there may be a basis for legal action to compel an infringing company to change its name.
How much does it cost?
See our list of fees for our most popular packages. If your needs are different, call, email or fax to us for our fees.
How long does it take?
The length of time to incorporate, and afterward to receive your corporate package, depends on the State and the
level of service requested. Many States do not provide for expedited service, so there is no way of honestly knowing
in those States how long it will take to process.
How do I get a tax ID number?
Federal Employer tax identification numbers are obtained by filing a form SS-4 with the Internal Revenue Service
center for your district. We can obtain a number on your behalf for an additional fee.
What is an S corporation? a C corporation?
All corporations are "born" as C corporations, and can only become an S corporation by filing a form 2553 Election to S
Corporation Status with the Internal Revenue Service.
In short, C Corporations file corporate returns and are taxable on their worldwide income without regard to their
shareholders. When profits after taxes are distributed to the shareholders, the shareholders are subject to income tax
on the dividends received.
An S corporation does not pay taxes itself: profits (or losses) are passed on to the shareholders directly; the
shareholders then add profits or subtract losses on their personal income tax returns.
