Protected by Copyscape Unique Content Check
Published: 28th November 2016
Views: N/A

The corporate structure is the best structure for business. Presently, why would I state this? Well, what leading company of any industry are not corporations? Most companies with record breaking profits are corporations, with the exception of professional services. These organizations have a huge number of legal counselors, CPA's, and experts. This team of expert could not have steered these corporations wrong. Why not mimic what research has already been performed by experts and copy the big boys. Let's analyze the corporate structure to decide what structure best suites a small business, C corp. vs. S corp.
Both corporate structures offer the same advantages except for tax assessments, which we'll specify later. The structures offer security of personal assets. Shareholders or stockholders of an organization's stock have no obligation regarding business commitments. Shareholder's risk is limited to money invested. Stockholders are only considered owners and are limited to managing the company by board of director selection. The ability to run operations is the obligation of the Board.
Corporations are represented under statutes. Each individual state creates corporate law with some states being more lenient than others. This explains why a significant number of companies are incorporated in Delaware. To form a corporation you must submit the required documents to the secretary of state's office for filing. The Articles of Incorporation will be Included in the documents required for filing. The corporate Bylaws are not subject to state filing requirements but should agree with the article of incorporation on corporate governance. The corporate bylaws essentially clarify the company rules for running the organization.

The Deciding component

The C and S Corporation structure are configured the same except for tax assessment. That IRS has previously stated the S corporation is the lead corporate type. This growth is most likely due to an increase in use of the corporation company structure by small businesses.

C Corp

The enterprise tax rate has a tendency to be lower than individual income tax rates because of the enterprises paying flat tax percentage. Income is not taxed at the owner level until a dividend is declared and paid to stockholders. This structure benefits owners who may not want to recognize personal income in current periods. The negative to the C corporation to is double taxation. The company is taxed on profit at the corporate level then tax again at the personal level upon distribution of dividends to owners. So the profit is in fact "double taxed", which is a great disservice for a small business owner.

S Corp

The IRS permits certain corporations to choose the S corporate status which implies the profits will flow through the business and to the owner. As such, the tax consequence will be paid on the individual income tax form of the owner. This can help reduce the tax burden in the early years. Allowing income earned via salary from the corporation to be offset by the loss of the company effectively reduce taxes due. For example, you can pay yourself a salary of seventy thousand with a corporate loss of twenty grand, you tax burden would then be based off of fifty grand of income. Thus reducing the taxes owed. Further the result of the same dollars not being taxed twice can reduce taxes.

Confinements on the S Corp Election

Only permitted 100 or less shareholders

Stockholders must be individuals

must be a domestic company

Only one class of stock

No foreign shareholders

The corporate structure profits the small business in through the protections of personal funds, easier access to investors, and the ability to be taxed as a partnership. In light of the data expressed I would decide to choose the S corporation. I trust this helps you consider what business structures will genuinely profit your company. Please click the link for more information on help with selecting company structures.

This article is copyright

Report this article Ask About This Article

More to Explore