Choosing the type of corporation for your business can have profound effects on your business later on in the future. There are many, many different types of corporations, each with different features and characteristics. They may also be associated with various advantages and disadvantages depending on your business needs.
One type of corporation may suit a business, while the same type of corporation might not work that well for another business. You may wish to research the different types of corporations that might work for your business. Some of these include:
- Business Corporation: This is your standard, for-profit corporation that most medium to large sized companies file as.
- Close Corporation: These are corporations whose taxation is handled directly through the corporation, rather than the shareholders. This has different tax consequences than other corporate forms such as an S Corporation.
- Non-Profit Corporation: These are corporations that focus mainly on charitable activities and programs. They are often given unique tax treatment.
- Professional Corporation: These are corporations that are made of professionals who are licensed to practice in a specific field, such as engineering, architecture, law, or other fields.
- S Corporation: These are corporations whose taxation is handled through the shareholders, rather than the corporation itself.
There are many other types of corporations, such as foreign corporations (corporations that operate in different states), private corporations, and many others. Every state has very different laws that regulate and govern corporate activity.
Some factors to consider when choosing a corporation include:
- Where to incorporate: Filing for incorporation in one state can lead to different tax treatment or other legal issues as compared with filing in a different state.
- Corporate taxes: Each corporate form is associated with a different type of corporate tax treatment. These can affect the overall profit and performance of the corporation.
- Liability: Some corporations such as professional corporations, may have different rules when it comes to issues like corporate liability or dissolution.
It may be necessary to hire a business lawyer when attempting to create or start a corporation. Your attorney can help you with the planning process, and can review any legal documents or plans. This can help to ensure that you’re making the right choice of corporations, and that your filings conform to state laws. Also, your attorney can represent you in court if you need to file a lawsuit due to a legal conflict.