Corporate

A corporation is an artificial legal entity, typically chartered by a state, generally formed to operate a business. Once chartered, the corporation is completely separate from its owners, has its own life, and is liable for its own debts and must pay its own taxes.

HOW CAN I SET UP A CORPORATION?

All states have a General Corporation Law or Business Corporation Law that allows virtually anyone to obtain a charter to conduct most businesses. (Certain types of corporations, such as banks, insurance companies, and public utilities often have to be formed either by act of the legislature or under special laws. This is a throwback to the days when all corporations were formed by a charter issued by the King of England, and later by a special act of a state legislature.)

The actual formal mechanics of creating a corporation is known as "incorporation." The process involves completing and filing a "Certificate of Incorporation" or "Articles of Incorporation" and paying a filing fee. Each state has its own set of laws governing the process of incorporating.

Corporate existence starts when the articles of incorporation are filed with the state office that handles incorporations (e.g., usually the Secretary of State or Corporation Commissioner), along with the required filing fees. Accelerated incorporations or same day filings are available in some states.

In addition to the standard "corporation" two relatively new forms of entities known as a "Limited Liability company" and "Limited Liability Partnership" offer many of the same benefits as the traditional corporation, plus some unique advantages.

WHY WOULD I CONSIDER AN LLC OR LIMITED LIABILITY COMPANY FORM OF BUSINESS ORGANIZATION?

A limited liability company (LLC) is a hybrid organization that has characteristics of both a corporation and a partnership. Its members (comparable to corporate shareholders) receive interests in the LLC in exchange for property, money, or services. Like a corporation, it is a separate legal entity for purposes of limited liability of its members. It has the tax benefits, however, of a partnership. It also has the freedom from many of the legal formalities that govern corporations (e.g., annual reports, director meetings, shareholder requirements, etc.).

To create an LLC, members file articles of organization with the state and pay filing fees. Members should also have operating agreements, similar in concept to a partnership agreement, that explains the operation and management of the business

There has been a lot of fanfare regarding this form of business enterprise and the law is still germinating. Each state has its own set of statutes governing LLCs -- which must dovetail with IRS guidelines which are in constant evolution. For this reason, it is a necessity to have the advice of an attorney to determine how the LLC law in your state best applies to your situation.

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