A corporation is a legal entity separate and distinct from its owners. Corporations are granted most of the rights and responsibilities that individuals possess. Corporations can enter into agreements, loan and borrow money, sue and be sued, hire employees or independent contractors, own assets, and pay taxes. The corporation can be organized as C-Corps or S-Corps.
C-Corporations are subject to double taxation. This means that they pay taxes on their income and shareholders pay taxes when dividends are paid. S-Corporations are special tax treatment corporations that are not subject to double taxation. S-corporations are also known as pass-through entities. This means that taxes are only paid when a shareholder receives dividends. To be treated as an S-Corporations an entity must make an express request with the New York Tax Department.
Is it complex to carry on business with a corporation?
As opposed to other forms of organization, the management of a corporation requires a minimum of executives to carry on the business of the corporation who constitute the Board of Directors. Shareholders are not allowed to manage or carry on the business of the corporation unless they are named as members of the board of directors or as officers. In the case of a single-member corporation, the shareholder can be the only member of the board and take on many different roles. The most important issue to keep always in mind is that, as long as formalities and protocols are followed, the management of a corporation can be successful, avoiding any issues related to the corporate veil.
How do I form a corporation?
Forming a corporation can be a pretty straight forward process. However, setting up an entity that actually serves the business purposes of its owners is a different thing. The first step is to conduct a search name. Once the prospective owners have determined the availability of the name of the corporation, the corporation can be formed by filing a Certificate of Incorporation. The rules about the formation of the corporation are located in Section 402 of the New York Business Corporation Law.
A Certificate of Incorporation can be drafted by the prospective owners of the corporation. It can also be filed using the form available on the NY Secretary of State website. If a person wants to prepare its own form of the Certificate, detail and care are advised. The Certificate must contain at a minimum, the words and phrases indicated in Section 301 of the Business Corporation Law. The completed Certificate of Incorporation, together with the statutory filing fee of $125, should be forwarded to the New York Department of State, Division of Corporations, One Commerce Plaza, 99 Washington Avenue, Albany, NY 12231.
What happens after the formation of the corporation?
Once the corporation has been created, several documents must be prepared and signed by the owners/shareholders of the corporation. The board of directors must be elected and the by-laws must be approved. These documents must be properly completed and then filed with the corporate minutes. To know more, you can read this note.