TYPES OF INCORPORATIONS

There are several types of corporations- each one having distinct advantages based on the need, entity structure selected, and the purpose formed.

"C" Corporation
A "C" Corporation is the traditional form of a corporate entity. It provides limited liability to its shareholders and is subject to double taxation. There is no limitation on the size of a "C" Corporation.

"S" Corporation
An "S" Corporation is a "C" Corporation with a special tax designation that allows it to avoid double taxation. A corporation seeking such tax designation must first satisfy certain qualifications, in which they will then file a special form with the IRS.

Limited Liability Company
A Limited Liability Company (LLC) is a relatively new form of business entity. It offers an alternative to both partnership and corporations by combining many of the advantages of each. Like partnerships, Limited Liability Companies allow for pass through taxation- meaning that the entity itself is not taxed, only the members. Like corporations, it offers similar levels of limited liability protection.

Why form an LLC instead of an "S" Corporation?
Although LLCs and "S" Corporations offer similar advantages in terms of liability protection and taxation, "S" Corporations must meet stringent requirements. "S" Corporations are limited to 75 shareholders, and those shareholders must only be natural persons (meaning corporations or other business entities may not own them). LLC's are more flexible in that there are no limitations.

What is a Non-Profit Corporation?
A Non-Profit Corporation differs from a "for" corporation in the establishment of membership. Non-Profit Corporations many not issue stock; therefore they do not have shareholders. Likewise, members of a Non-Profit Corporation do not invest in it. They may, however, pay dues or contribute donations. The Non-Profit 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, nonprofits do not have the profit motive. Non-Profit Corporations are allowed to apply for tax-exempt status at both the Federal and the State level.