What are some types of corporations?
There are many different types of corporations but some of the more popular types are S Corporation, C Corporation, and a Non-Profit Corporation. Every corporation is classified as a C corporation initially. A C Corporation is taxed on its income and then the owners are taxed on their income which comes from the same money. Some people consider this being double taxed for the money that comes in. If the business owner does not apply for any subdivisions for their corporation, it will remain a C Corporation for its life cycle.
One type of subdivision a business owner can apply for is a S Corporation. A S Corporation changes the way the taxes work. This type of corporation is known as a Small Business Corporation. Instead of being taxed like a C corporation, the business owners claim the company’s revenue as their personal income and are taxed individually. Most other aspects of the company are the same as if it were a C Corporation but this makes it so the business owners aren’t double taxed for the same money since these are typically smaller corporations with a smaller revenue stream. This works best on a smaller scale since each business owner would be claiming the company’s revenue which is generally lower for a smaller corporation.
Non-Profit Corporations are a little different. Typically corporations are designed to bring in revenue for the business owners, but Non-Profit is set up to benefit a charity or group with no benefit to the business owners. Because of this, these businesses are able to apply for a non-exempt status where they won’t have to pay taxes at all. This includes the state level. It wouldn’t matter how much revenue they bring in. All of their money would go toward operating costs and the charity or group they are working for so they could have a large or small corporation and remain tax exempt.
How do I set up different types of corporations?
Setting up a corporation in general takes a lot of time and planning. Generally, you have to plan all the details like name, location and websites. Then they would hire a registered agent to walk them through the process of documenting and applying for the corporation. Next they’d want to find shareholders and directors and start planning out bylaws and roles within the business. Once the corporation is approved it would automatically be a C Corporation. If the business owner wants to make the company a S Corporation they would go through the same process as opening any company, but once they are approved they would then file another form to apply for the subdivision. This is a form that is signed by all shareholders and filed with the IRS electing for the different tax benefits. Setting up a non-exempt or any other type of corporation would work the same way. The business owners would go through the process of opening a corporation and then file a separate form with the IRS and state level to make them tax exempt. If the business owner needed assistance with this TRUiC is a website that has guides in how to go about doing these things. Visit their website to check it out https://www.google.com/url?q=https://startupsavant.com/how-to-form-a-corporation&sa=D&ust=1591023252298000&usg=AFQjCNFAQQKuzHKLVLvsas1En9oO-thgkw.
Which is best?
The business owners would want to consider the type of business they are planning to have in order to decide if they want to apply for any of the corporate subdivisions. There are many types of corporations, so the business owner would need to learn about which would be right for them and their needs. If a business owner is looking to become a corporation but has a smaller business with less shareholders, it may be smarter for them to apply for the S Corporation. If the corporation has many shareholders, it could be smarter for them to stick to a regular corporation or a C Corporation for financial clarity. If a company is Non-profit, they will know going into the process that they want to apply for the subdivision as this will be part of their business model.
Business owners should look into what types of corporations there are and see which would best benefit them and their financial bottom line. They would also want to look at different tax breaks they can get and if there are any differences between the different types of corporations they are considering. Just because a type of corporation is more popular doesn’t mean it’ll be a better choice for every business owner’s needs.