What is a corporation?
A corporation is a legal entity created by properly filing the articles of incorporation and paying a fee to the appropriate governing state agency. Upon recognition as a legal corporation the company may issue stock and operate either privately or as a publically traded corporation. Although, nonprofit corporations do not issue stock and are known as non-stock corporations.
What is the difference between an S Corporation and a C Corporation?
When a corporation is formed it is automatically recognized as a C Corporation. This is the most common type of corporation and all publicly traded corporations operate as such primarily because there is no limitation on the number of shareholders. A C Corporation becomes an S Corporation when it files a Form 2553 (Election by a Small Business Corporation) with the IRS. Many small business owners make this election because all income, deductions and credits are taxed only at the shareholder level, thus avoiding the “double taxation” that C Corporations and their shareholders experience. S Corporations are often referred to as Subchapter S Corporations and are classified as pass-through entities.
Should I hire an attorney to incorporate my new business?
An incorporator is not legally required to use an attorney to establish a corporation (except in South Carolina), but it is strongly recommended that one be retained for the creation and filing the articles of incorporation and for other general consultation. A corporate attorney is an important part of starting your small business and can prove to be a valuable resource in the future. Upon request, Monfalcone & Garris can provide referrals of experienced general business attorneys in the Charlottesville area.
What are the benefits of incorporating my trade or business?
There are many benefits of incorporating including limiting owners’ personal liability, protecting the corporate name, adding credibility and deriving tax benefits. By incorporating, arguably the most advantageous benefit is the limited liability of shareholders. Generally, the owners’ personal assets are protected from corporate obligations, judgments and litigation. The added ability to establish qualified retirement plans and employee benefit plans, plus the ease of ownership transfer and the ability to raise capital, often make incorporation a prudent decision.
What is a Registered Agent?
The Commonwealth of Virginia, and most every other state, requires that an entity have an agent registered with the incorporating state. The duty of the registered agent is to forward to the business entity any official state correspondence or court processes that the agent receives. Virginia requires that the registered agent be either a member of the Virginia State Bar or any other person serving as a director or owner of the business entity.
What is a Federal Tax Identification Number or EIN and how do I obtain one?
As a newly organized entity, generally you must apply for an Employer Identification Number (EIN). This nine-digit number will be assigned to your entity after filing a paper Form SS-4 (Application for Employer identification Number) with the IRS or using the online EIN application feature on the irs.gov website. If you apply for your EIN online through the irs.gov website you will immediately receive your EIN upon completion. The EIN is used by household employers, sole proprietors, partnerships, corporations, non-profits, trusts, estates and government agencies when complying with all income, employment and other reporting requirements. Upon request, Monfalcone & Garris can assist with filing Form SS-4.