Incorporation FAQs
	What is a corporation? Who can form a corporation? Do you need an attorney to form a corporation? What are the main differences between a C corporation and an S corporation? What are the main differences between an LLC and an S corporation? What is the procedure for forming a corporation, and what legal documents are required? Can I be the only stockholder in my corporation? Where should I incorporate? How much will it cost to form and run a corporation? What if I am not a U.S. citizen but I live in the U.S.? I am a U.S. Citizen living outside of the U.S., can I still form a corporation? Can I have special text included in my operating resolutions? What do my articles look like? When will I get the original copy? Can a corporation own another corporation or an LLC? How can I include this on your questionnaire? I am moving to another state. How do I move my company? How can I convert my limited liability company (LLC) to a corporation? How can I convert my corporation to an LLC? How do I add a stockholder to my corporation? Why am I getting junk mail and phone calls with someone else's name? I want a professional corporation. How do I select that on the questionnaire? What is a corporation? A corporation is a distinct legal entity created under state law which can open a bank account, purchase property, enter into contracts and operate a business. One of the most important features of a corporation is that generally, its owners are not personally liable for the debts of the corporation. Who can form a corporation? Anyone who completes the articles of incorporation and pays the state filing fee can form a corporation. However, some states have age restrictions regarding shareholders (under 18). You may need to call your Secretary of State to see if there is an age restriction with your state. Do you need an attorney to form a corporation? An attorney is not necessary when forming a corporation. You can prepare and file the legal paperwork, or use LegalZoom. If you think you have a complicated or special circumstance, you may want to seek the advice of an attorney. What are the main differences between a C corporation and an S corporation? C corporations are subject to a principle commonly known as “double taxation;” that is, one tax at the corporate level on the corporation's net income, and another tax on the shareholders when the profits are distributed to them. S corporations, on the other hand, have only one level of taxation. All corporate income is allocated to its stockholders. However, C corporations have greater tax planning flexibility and can shield stockholders from direct tax liability. In addition, S corporations are subject to limitations, such as the number and type of stockholders it can have. LegalZoom is not authorized to give you legal advice about whether a C corporation or an S corporation would be the right choice for you. If you are still trying to decide which structure would be best for your business, you may want to ask your CPA or tax attorney for advice. What are the main differences between an LLC and an S corporation? An LLC has more operating flexibility and less corporate formalities than an S corporation. For example, an S corporation cannot have more than 75 stockholders, must hold periodic director's meetings and must hold an annual meeting of stockholders. However, owners of an S corporation may be subject to fewer taxes than owners of an LLC. For more information, please see "Corporations compared to LLCs" in the LegalZoom law library. LegalZoom is not authorized to give you legal advice about whether an S corporation or an LLC would be the right choice for you. If you are still trying to decide which structure would be best for your business, you may want to ask your CPA or tax attorney for advice. What is the procedure for forming a corporation, and what legal documents are required? In order to create a corporation, articles of incorporation need to be filed with the Secretary of State or other similar state government agency. Next, bylaws and organizing resolutions must be adopted. A corporation also needs to apply for a tax identification number with the IRS. Unlike many other incorporation services which only create and file the articles of incorporation, LegalZoom prepares and completes all of these required documents, including customized bylaws and organizational resolutions. Can I be the only stockholder in my corporation? A corporation can be formed with only one stockholder. However, corporate formalities, such as director and shareholder meetings, are still required in order to preserve the corporate form and help keep the stockholder from personal liability. Where should I incorporate? Before making a decision about where to incorporate, many customers first check with their accountant or the Secretary of State to find out about additional fees that may apply if they decide not to file in their home state. A corporation can incorporate in any of the 50 states plus the District of Columbia. Delaware is popular because of its history, experience, popularity and pro-business climate. Nevada is also popular because of its pro-business environment and lack of formal information-sharing agreement with the IRS. Many people also choose to incorporate in their home state, which can save them money in filing fees. That is because corporations are required to register in each state where they do business. For example, a Delaware corporation that has its main business office in Florida must register as a "foreign corporation" with the Florida Secretary of State. How much will it cost to form and run a corporation? Each state charges some type of annual fee to maintain a corporation. In many states, you must also submit an "annual report" or "list of directors and officers," which is a one-page form sent by the state. Some states also have state taxes. Annual fees for three popular states – California, Nevada and Delaware – are as follows: California: A reporting fee of $25, along with a list of directors and officers, is required every year, beginning 60 days after incorporation. State income tax for C-corporations in 2004 was 8.84%, with an $800 minimum (the minimum tax is waived the first year). State income tax for S-corporations in 2004 was 1.5% for most types of income, with a minimum of $800 (the minimum is waived the first year). Nevada: An Initial List of Officers and Directors is due 30 days after incorporation with a $125 fee. Annual fee is $125. There is no state income tax or franchise tax. Delaware: A minimum annual franchise tax of $30 (which increases based on the total number of shares authorized). Annual report filing fee is $20. There is no state income tax. Every Other State: Contact a local accountant. What if I am not a U.S. citizen but I live in the U.S.? Neither the stockholders nor the officers of a U.S. filed corporation are required to be U.S. citizens. You may use your passport number instead of your social security number to complete any federal forms. (For an S corporation, the majority of stockholders need to be U.S. citizens or residents). I am a U.S. Citizen living outside of the U.S., can I still form a corporation? If you are presently residing in a non-U.S. country, you may use LegalZoom to form your corporation. Can I have special text included in my operating resolutions? You may add special text. However, you have to know which article to include it in and send in the text so that it can be included in a legal document. You may want to contact an attorney to add special text to your documentation. What do my articles look like? When will I get the original copy? Every state is different, so there is not one clear description of articles. In some states, the articles of incorporation look like a certificate. Other states simply stamp a filing date on a form application for incorporation. Some articles are a faxed or photocopied black and white document. The articles will generally state “Articles of Incorporation” at the top of the paper and will have an official filing date stamped on them. Can a corporation own another corporation or an LLC? How can I include this on your questionnaire? Generally speaking, unless limited by state law, a corporation owning another corporation or LLC is allowed, with certain restrictions. To own an LLC, the corporation has to be the sole member. If an LLC owns a corporation, it owns all of the corporation’s shares. LegalZoom recommends you speak with a tax attorney, accountant, or an attorney regarding this option. I am moving to another state. How do I move my company? LegalZoom can assist you in dissolving the already existing corporation and re-filing a new corporation in the new state. We can certainly help you form an entirely new corporation, but it is best if you speak with an attorney or accountant to consider your options. How can I convert my limited liability company (LLC) to a corporation? There are many ways to convert an LLC to a corporation, each of which has different legal and financial implications. For example, you could convert through a merger, or you could simply start a new corporation and contribute the assets of the LLC into the corporation. We can certainly help you form an entirely new corporation, but it is best if you speak with an attorney or accountant to consider your options. If you would like to find a local attorney who can help, you can try our attorney-by-request service. You describe what you need, and attorneys will then compete for your business. Click on this link for more information: http://www.respond.com/?src=49 How can I convert my corporation to an LLC? Generally, you cannot convert a corporation to an LLC. You will need to dissolve your corporation. Once you have done this, you can typically form a new LLC using the same name. How do I add a stockholder to my corporation? Adding stockholders to your corporation may be done internally. First, you should read your operating agreement/resolutions/bylaws for more information on the procedure. If any of the member/stockholders are listed with the state or IRS you will need to go directly to the Secretary of State and update the information with them as well. Why am I getting junk mail and phone calls with someone else's name? LegalZoom does not, nor will it ever, sell your information to another company. We believe selling your information violates your privacy, and we pride ourselves on offering the best service and the highest degree of security to our customers. In most cases, it is actually the Secretary of State who makes this information, or your registered agent’s address, public. Even if you choose LegalZoom to be your registered agent, some states still list your business address on public records. I want a professional corporation. How do I select that on the questionnaire? You can check the box inside the corporation questionnaire stating that yours is a professional corporation. An additional $50 will be charged to your account. If you are not sure whether your corporation should be filed as a professional corporation, you may want to check with your state licensing board or contact the Secretary of State for more information. Point of origin credit for this file is given to LegalZoom.com, Inc., a registered and bonded legal document assistant, #0104, Los Angeles County. LegalZoom.com is not a law firm and is not a substitute for the advice of an attorney.