Freelance Writer and Small Business Expert

Smallbizstew.blogspot.com eBook

Web: http://www.smallbizstew.blogspot.com
Email: austin.dawn@ymail.com
 There is a lot to know about the different types of entities and
figuring out which entity is best for your business is extremely
important. There is so much information to be told about each entity
that SmallBiz Stew created a free eBook series to help you pin point
which entity is best for you and your business.

In this eBook you will learn all about corporations from S&C
corporations to a non profit organization. You will also learn in this
eBook, simple methods on how to pick the right business entity for
your business.
This is a good resource for already established businesses that may
need a refresher course about their business entity.
Keep in mind

When deciding on which entity is best for you keep the following in
mind:
 Your Business goals
 Business structure
How do you want your business structured?
 Business legal vulnerabilities
Are you entering a high-risk business that may make your
business vulnerable to lawsuits?
 Tax effects
What are the tax implications and which entity offers the best tax
benefits?
Copyright holder is licensing this eBook under the Creative Commons
License, Attribution http://creativecommons.org/licenses/by-nc-nd/3.0/
 Profit/Loss projection and investment
Please feel free to post this eBook on your blog, email it, or link to it with  Start Up cost
whomever you believe will benefit from reading it. Photo by: Rafael
Chamorro- http://www.flickr.com/photos/rchamorro/2465511313/  Ease of ending business
Starting a business requires a lot of
decisions and some of those choices
can legally bind you to them. Being
completely informed on the decisions
you have to make will help you make
the right decision that best suits your
personal and business needs. Today’s
discussion will cover S & C corporations
and non-profit.
This eBook courtesy of Dawn Austin, writer of SmallBiz Stew! Copyright @ 2010 SmallBizStew.blogspot.com. All Rights Reserved. Photo by: Thinkpanama-
http://www.flickr.com/photos/23065375@N05/2247354856/
To start a corporation means to start a business that is
considered legally a special entity separate from its owners.
Corporations are seen as an entity that can be legally sued,
responsible for tax obligations and other obligations as a sole
proprietor would. The biggest difference between corporations
and general partnerships (GP) is the business structure. GP's
are usual in charge of the day to day business activities and
make all the necessary business decisions but corporations
are run by elected board of directors who oversee the major
operations for the shareholders (owners). Another difference
between corporations and partnerships is the vitality of the
business depends heavily on the longevity of the partnership
wherefore corporations continue to move on even after
ownership change.
Trying to figure out if a corporation is the best entity for you
and your business, use the below advantages and
disadvantages to help you decide.
 The advantages of the business entity Disadvantages of the business entity corporation
corporation
 Long and costly set up
 Limited Liability- Risk usually is limited  Heavily regulated
to the shareholders investment in the  Depending on what type of corporation can be
business (there are exceptions see double taxed
www.irs.gov for more).  Possible higher taxes
 No longer complete control over business
 If the corporation is a stock-corporation  Shared profits
then capital can be raised through
selling of company stock

 Tax deductions for employee benefits

 Depending on the type of corporation

may be able to do pass thorough taxes.

 Assistance with startup cost

This eBook courtesy of Dawn Austin, writer of SmallBiz Stew! Copyright @ 2010 SmallBizStew.blogspot.com. All Rights Reserved. Photo by: Thinkpanama-
http://www.flickr.com/photos/23065375@N05/2247354510/in/photostream/
 Business Name Check
You have to make sure that the
business name that you have isn't
already being used by another
corporation and that your
corporation name is in compliance
with your state corporation rules.
 Appointment of Directors
The Board of Directors is the
decision makers who possess the
creative control to guide the
business during financial decisions
including the disbursement of stock
and the appointment of corporate
officers. Check with your state rules
to see if it is necessary to list the
initial directors in your filing. Some
corporations use their first meeting
to decide on directors.
This eBook courtesy of Dawn Austin, writer of SmallBiz Stew! Copyright @ 2010 SmallBizStew.blogspot.com. All Rights Reserved. Photo by: Thinkpanama-
http://www.flickr.com/photos/23065375@N05/2247354510/in/photostream/
 Paperwork
 Stock
You will need to complete the necessary
The issuing of stock to shareholders detailing
paperwork usually titled Articles of
their ownership shares in the corporation.
Incorporation with your secretary of
state and pay the requested filing fee. The
Starting a corporation can be very time
filing fee also varies by state and ranges
consuming and strenuous on your pockets.
from $55 to $400. Check with your
secretary of state website to get the state
Knowing which corporation you want to start
can take some of the headache out of the
specific requirements and the necessary
battle.
paperwork.
There are different types of corporations that
www.sos.state. (enter your state abbr.).us
you can start. Two of the most popular are S
corporation and C Corporation. S and C
 First Meeting
corporations originate from the corporation
Have your first meeting with the board of
govern subchapters of the Internal Revenue
directors where you can discuss the
Code. Both types are corporations but with
necessary things to begin your corporation.
different governing rules and tax implications.
This may be the time that many
Each is seen as separate identities from its
corporations chose to pick the board of
owner and both offer limited liability protection
directors and corporate officers.
to its owner. Outside the tax implications both
corporations are governed by the same rules,
so now let’s look at what makes them
different.
 S corporations are corporations that elect to pass Qualifications for S corporation status
corporate income, losses, deductions and credit
through to their shareholders for federal tax  Be a domestic corporation
purposes. (IRS, April 2010)
 Have only allowable shareholders
The great thing about S corp. is the fact they are
allowed the special tax privilege pass-through  Including individuals, certain trust,
treatment. and estates and may not include
partnerships, corporations or non-
Pass-through tax treatment allow for business resident alien shareholders
owners to report their gains/losses on their
personal income tax which eliminates the  Have no more than 100 shareholders
possibility of double taxation.
 Have one class of stock

 Not be an ineligible corporation i.e.

certain financial institutions,
insurance companies, and domestic
international sales corporations.

This eBook courtesy of Dawn Austin, writer of SmallBiz Stew! Copyright @ 2010 SmallBizStew.blogspot.com. All Rights Reserved. Photo by: Thinkpanama-
http://www.flickr.com/photos/23065375@N05/2247354510/in/photostream/
 All publicly owned businesses are C The major differences between S&C corporations
corporations because unlike S corp.'s., C
corp.'s can have unlimited owners. As a C  Most C corp.'s are publicly owned business and that’s
corporation you also benefit from the the biggest difference between S and C corporations.
dividends received deduction (DRD) S corporations are not allowed to have more than
which make dividend payments tax 100 owners but a C corporation can have unlimited
deductible. Which protects C corporations number of owners.
from being triple taxed; Corporation taxed,
corporate shareholder then individual  Corporations, partnerships, LLC's can become a C
shareholder taxed but DRD protects the C corp. because C corp. is not limited to possible
Corporation from triple taxation. owners (shareholders).

 Shareholders and C corporations are taxed

subjecting C corporations to double taxation, but S
corporation are given pass through tax treatment.

This eBook courtesy of Dawn Austin, writer of SmallBiz Stew! Copyright @ 2010 SmallBizStew.blogspot.com. All Rights Reserved. Photo by: zzzack-
http://www.flickr.com/photos/zack-attack/399240900/
 Another popular type of corporation is nonprofit organization. As a
nonprofit you are in the business of providing a service or program for
the sole purpose of development rather than for self or community. S
and C corporations are for-profit organizations that sole purpose is to
profit and redistribute those profits amongst the stakeholders in the
business. A nonprofit may accrue earnings but it is for the sole
purpose of self preservation and financial backing for future business
plans. The stake holders does not financially profit from the success
of the nonprofit.

These are formed for civic, educational, charitable, and religious

purposes and enjoy tax-exempt status and limited personal liability.
(SBA)

The major advantage of non profit is the ability to file for tax-
exemption from income tax and for some charitable organizations,
property taxes. It does not make them exempt from employment
taxes. Other advantages are the limited liability and starting a
nonprofit may qualify you for grants and other financial assistance.

This eBook courtesy of Dawn Austin, writer of SmallBiz Stew! Copyright @ 2010 SmallBizStew.blogspot.com. All Rights Reserved. Photo by: Shelly-
http://www.flickr.com/photos/shellysblogger/2464975775/in/photostream/
 Starting a corporation can be a tedious task and making Deciding on the right entity can be at times tough
sure that your business structure is set up correctly and and maybe speaking with a professional who has
meet the many legal requirements can be experience in business and tax law can you help
overwhelming. Seeking the assistance of an attorney you decide on the right business entity for you.
will not only help you make an inform decision but will
also make sure that you are in compliance with the Make sure to visit your secretary of state website for
state and federal government. state specific requirements for starting a business in
your state.
This is the end of the three part discussion on different
business structures. When trying to figure out which www.sos.state. (enter your state abbr.).us
entity is best for you and your business, keep the
following in mind: This eBook teaches what a corporation is and the
different business structures under corporation.
Your Business goals
 Business structure-How do you want your business This eBook is free public service of
structured? SmallBizStew.blogspot.com. Please share this
 Business legal vulnerabilities- Are you entering a eBook with anyone. To learn more helpful
high-risk business that may make your business information, tips and methods to start a small
vulnerable to lawsuits? business visit
 Tax effects- What are the tax implications and which http://www.smallbizstew.blogspot.com.
entity offers the best tax benefits.
 Profit/Loss projection and investment
 Start Up cost
 Ease of ending business

Copyright holder is licensing this eBook under the Creative Commons License,
Attribution http://creativecommons.org/licenses/by-nc-nd/3.0/. Please feel free to post this eBook on your blog,
email it, or link to it with whomever you believe will benefit from reading it. Photo by: Shelly-
http://www.flickr.com/photos/shellysblogger/2464975775/in/photostream/
 About Dawn:
A professional independent writer who uses innovative and
creative ways to fulfill companies freelance writing needs. Dawn’s valuable knowledge and
Specializing in small business start up and literature with experience on the intricate parts of
over 10 years of experience in small business. starting a small business arms
potential entrepreneurs with all the
In 2010, she launched a small business blog titled necessary tools needed to start a
http://www.SmallBizStew.blogspot.com, where she is able to small business without some of the
share her 10 years of experience and knowledge to potential hassle that most new entrepreneurs
entrepreneurs who desire an in-depth understanding of how experience.
to start a new business. Her experiences afford her the
opportunity to not only share proven methods but also tips
and lessons that small business owners can use to help the Dawn Austin is available for small
vitality of their business. business start-up consulting and
freelance writing service at:
Her knowledge and blog discussions cover a broad range of
small business information like: legal, administration, Web: http://www.dawnaustin.com
suppliers and book keeping. The information that she Email: austin.dawn@ymail.com
provides to small business owners are geared toward helping
them: minimize mistakes and risks, make informed decisions, Check out my small business blog for
simplify legal jargon, stay in compliance and most important assistance on small business start-up.
help them get started.
http://www.smallbizstew.blogspot.com.

Dawn Austin
This eBook courtesy of Dawn Austin, writer of SmallBiz Stew! Copyright @ 2010 SmallBizStew.blogspot.com. All Rights Reserved