I am starting an Internet company and want to determine whether to incorporate as an S Corp or C Corp?
Answer:
Both Corp forms will provide you with the security of a corporate veil. An S corp will allow you to take company expenses and losses off of your personal taxes. A C Copr. will have more rules and less flexibility. The best thing to do is contact an accountant. I have had a number of businesses over the years and have always opted for an S-Corp. Hope this helps.
Depends on the nature of your internet business. If you plan to be the only worker, or only have a few, the S may work for you. But there are ownership restrictions on an S that may be problems if and when you grow.
Have you looked into setting up an LLC, instead?
www.score.org. free advice for the tax payers, green card holders and us citizens.
Forming of the “C” Corporation
A "C Corporation" is taxed under Subchapter C of the Internal Revenue Code. As a legal entity (an artificial person), the C corporation is separate and distinct from the stockholders – the owners of the corporation. Under general incorporation laws, there is no distinction between a C corporation and an S corporation. However, the two types of corporate entities are subject to differing federal and state tax treatment.
As a tax-paying entity, the C corporation must pay taxes on its taxable income prior to making dividend distributions to stockholders. It is allowed to issue more than one type of stock and can have any number of stockholders.
As a separate legal entity, the corporation's finances and records are established and maintained completely separate and distinct from the finances and records of the stockholders. Through a resolution adopted at a stockholders meeting held in accordance with the bylaws of the corporation, one or more officers or employees of the corporation are authorized to conduct business on behalf of the corporation. The resolution typically includes an authorization within specified limits to borrow and repay funds as needed for business operations. The authorized person or persons make credit arrangements in the name of the corporation with loan document signatures after the lender has received a certified copy of the authorizing resolution. If the corporation is newly formed, small (has few assets), or has a limited record of credit use, it's likely that a lender will require personal guarantees by one or more officers or stockholders before approving a credit application from the corporation. If personal guarantees are given, the signer(s) usually have unlimited liability for the debts of the corporation.
The Corporate Charter includes information on the purpose(s) for which the corporation is organized and the life of the corporation. (A corporation often has perpetual life.) Bylaws of the Corporation are the "rules" for conducting the organizational life of the corporation.
Moderate legal costs are incurred in setting up a C corporation, and annual costs are incurred for stockholders meetings, tax return preparations, and preparing other yearly reports and summaries as needed for management and desired by stockholders. Public notice of the formation and continued operation of a corporation is required and is accomplished through filings with the Secretary of State's Office.
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