Business Formation Packages

C Corporation (Standard Corporation)

C Corporations provide Limited Liability Protection and generally offe more tax advantages from contributions to retirement plans than LLCs.

Advantages of a C corporation

• Shareholders of a C corporation are typically not personally responsible for the debts and liabilities of the business
• C corporations can have an unlimited number of shareholders
• Ownership of a C corporation is easily transferable through the sale of stock
• C corporations have unlimited life extending beyond the illness or death of the owners
• Additional capital can be raised by selling shares of the C corporation's stock
• Potential customers may perceive a C corporation as a more professional entity than a sole proprietorship or partnership
• C corporations are generally audited less frequently than sole proprietorships
• Certain C corporation business expenses may be tax-deductible
• Forming a C corporation can result in self-employment tax savings
• C corporations may provide a number of income and tax savings

S Corporation (Standard Corporation with Pass-Through Taxation)

S Corporation offers the same advantages as c corporations, but eliminate double taxation.

Before you incorporate a business as an S corporation, it is important to understand what having an S corporation means. An S corporation is a standard corporation that has elected a special tax status with the Internal Revenue Service (IRS). The formation requirements for an S corporation are the same as those for a C corporation, wherein formation documents must be filed with the appropriate state agency and the necessary state filing fees paid. 

Plaza Company Wizard will not only incorporate your company with the state, but we can also assist you with the filing of your S corporation election with the IRS. BizFilings’ formation services for S corporations include the preparation of IRS Form 2553. With our Complete Formation Package, we will file this form and interact with the IRS on your behalf.

One reason so many small business owners choose to elect S corporation status with the IRS is that the S corporation’s special tax status eliminates the possibility of double taxation common to C corporations. With S corporations, a corporate income tax return is filed but no tax is paid at the entity level. Instead, the profits or losses of the corporation are “passed-through” to the shareholders and are reported on their individual tax returns.

Advantages of an S Corporation:

S corporations avoid the possibility of double taxation on profits
Shareholders of an S corporation are typically not personally responsible for the debts and liabilities of the business
Ownership of an S corporation is easily transferable through the sale of stock
S corporations have unlimited life extending beyond the illness or death of the owners
Additional capital can be raised by selling shares of the S corporation's stock
Potential customers may perceive an S corporation as a more professional entity than a sole proprietorship or partnership
S corporations are generally audited less frequently than sole proprietorships
Certain S corporation business expenses may be tax-deductible
S corporations can result in Self-Employment Tax Savings
S corporations may provide a number of income and tax savings
S corporations are subject to restrictions imposed by the IRS on who can be owners. S corporation owners (shareholders) must meet the following criteria:

Number fewer than 100
Cannot be non-resident aliens
Cannot be C corporations, other S corporations, limited liability companies (LLCs), partnerships or certain trusts. 

Limited Liability Company (LLC)

The Limited Liability Company (LLC), is a business entity that offers limited liability protection and pass-through taxation. An LLC can be managed by either the members or by managers.

Advantages of a Limited Liability Company:

LLCs allow for pass-through taxation
Members on an LLC are not typically held personally responsible for the debts and liabilities of the business
LLCs generally have no ownership restrictions
LLC members have flexibility in structuring the management of the company
An LLC does not require as much annual paperwork, or have as many formalities, as a C corporation or an S corporation
Written consent of LLC members must be obtained prior to increasing ownership in the company
Potential customers may perceive an LLC as a more professional entity than a sole proprietorship or partnership

Limited Partnership (LP)

A limited partnership (LP) is similar to a general partnership while still offering limited liability protection to some of the partners. In an LP, at least one partner must be a general partner with unlimited liability, and at least one partner must be a limited partner whose liability is limited to the amount of his or her investment. Limited partners act as “silent partners” making a capital investment much like passive shareholders in a publicly traded corporation but having no involvement in the management decisions of the business.

An LP allows for pass-through taxation, as its income is not taxed at the entity level. Limited partners can use losses to offset other passive income on their tax returns. General partners losses can be used to shelter other income up to the value of their investment in the partnership since their losses are not usually considered passive.

The LP organization is especially appealing to types of businesses where a single, limited-term project is the focus such as real estate or the film industry. LPs can also be used as a form of estate planning.

Advantages of a Limited Partnership:

LPs allow for pass-through taxation
Limited partners are not held personally responsible for the debts and liabilities of the business
Provides additional sources of investment capital
The general partner(s) have full control over all business decisions
Partners have more flexibility in structuring the management with less formal requirements and annual paperwork

Nonprofit Corporation

A nonprofit corporation is an entity formed for purposes other than making a profit. Nonprofit corporations are formed pursuant to different state laws than standard for-profit corporations; however, the process of forming a nonprofit is very similar.

To be considered tax-exempt, nonprofits must apply for federal and state (if applicable) tax-exempt status. Tax-exempt status is not automatically granted once the nonprofit corporation is formed. To apply for federal tax-exempt status, Form 1023 must be filed with the IRS. For state requirements, it is best to contact the department responsible for taxation in the state of formation.

Like standard for-profit corporations, nonprofits provide limited liability protection. The personal assets of the directors or officers typically cannot be used to satisfy the debts and liabilities of the nonprofit.

To qualify for federal tax-exempt status under 501(c)(3) of the Internal Revenue Code, the nonprofit must be organized and operate for some religious, educational, charitable, scientific, literary, testing for public safety, fostering of national or international amateur sports, or prevention of cruelty to animals or children purpose permitted under this section of the code.

Advantages of a nonprofit corporation:

Directors are typically not personally responsible for the debts and liabilities of the nonprofit corporation
Nonprofit corporations have the ability to apply for both federal and state tax-exempt status
Certain nonprofit corporations are eligible to receive public and private grants, making the obtainment of operating capital easier
With 501(c)(3) nonprofits, donations made by individuals to the nonprofit corporation are tax-deductible
In order to form a nonprofit corporation, nonprofit articles of incorporation or a nonprofit certificate of incorporation must be filed with the appropriate state agency and the necessary state filing fees paid. The formation documents must include certain clauses and information, such as a very detailed business purpose statement, in order for the entity to qualify for tax-exempt status. Thereafter, form 1023 must be filed with the IRS.

Business Formation for Non-US Clients

Plaza Company Wizard forms corporations, limited liability companies (LLCs) and nonprofit corporations in all states for citizens from other countries. To create a corporation or LLC, the proper formation documents must be filed with the appropriate state agency and the necessary state filing fees paid.

Plaza Company Wizards' Non-US Clients Package is specifically designed for companies without a mailing address in the United States. It is not intended for foreign nationals living in the US or for international companies that have a US operating address.

This package includes documents that may be required to open a bank account in their home country. We suggest contacting the potential banking institution to find out what information is required to open a bank account.

Professional Corporation or LLC

Professional corporations (PCs) and professional limited liability companies (PLLCs) are corporations and limited liability companies organized for the purpose of providing professional services.

What services constitute professional services are defined by state law, and differ from state to state; however, it is typically professions requiring a license, such as doctors, chiropractors, lawyers, accountants, architects and engineers that are required to form PCs or PLLCs .Additionally, a PC or PLLC must typically be organized to solely provide the services of the licensed practitioners.

The formation of a PC or PLLC involves additional steps, such as approval by the appropriate state licensing body and signature of a licensed professional as the incorporator or organizer, prior to sending the formation documents to the state. In addition to preparing and filing the necessary documents with the appropriate state agency in order to establish your PC or PLLC, Plaza Company Wizard also addresses the additional requirements imposed by your intended state of formation.