Small businesses can also file for incorporation. This will allow the business to operate as its own legal entity, and may also provide various protections for business owners and shareholders. There is no set formula for choosing a form of corporation for small businesses. You will need to consider all the needs of the business in order to ensure that the right type of corporation is being selected.
Some common corporation forms used by small businesses may include:
- Professional corporation: This is where a small number of licensed professionals pool together resources in order form a body of practicing professionals (for instance in the field of psychology, law, engineering, or other areas).
- Close corporation: This is where ownership and control of the business is localized into only a few different individuals. This is often an ideal form of corporation for family businesses.
- Non-profit corporation: Many charitable organizations file under this type of corporation, which often has various tax breaks associated with it.
- Foreign corporation: This is a corporation that is registered in one state, but conducts business in a different state or in many other states. Filing as a foreign corporation may help the small business to grow and expand.
Many corporations choose to file as a limited liability company (LLC). This is a business structure that is similar to a corporation, but is often less difficult to register. For instance, LLC’s are often associated with similar liability protections as a corporation. They may also allow for very specific tax-related incentives.
You may wish to hire a lawyer if you believe that your company might benefit by filing as an LLC rather than a specific type of corporation. Many small businesses also file as close corporations rather than LLC’s, as close corporation formalities are not as complex as those for other corporate forms.
Choosing to incorporate your small business is a major decision. You may need to hire a business lawyer if you need assistance with the filing, reviewing, and submission of corporate documents with the state. Your attorney can provide you with valuable legal advice on the various types of corporations available in your state. Also, your lawyer can represent you in court in the event that a legal dispute arises during the incorporation process.