Establish Your Arizona Corporation.
What is a Corporation?
A corporation is a legal entity that is filed with the state and conducted separate from its shareholders.
It is the more formal business structure of the two when compared to an LLC, requiring annual minutes of shareholders’ and directors’ meetings.
An Arizona corporation provides limited liability protection to its shareholders so long as all formalities are maintained.Extenuating circumstances which could expose a shareholder to personal liability may include co-mingling of personal assets with company assets, fraud or an intentional tort.
When the company is formed, it will need to elect its tax status as a “c” corporation or an “s” corporation. The company will be taxed by default as a c-corporation, which results in the corporation paying taxes on its profits, and again when the shareholders pay taxes on their dividends from the company.
A company which elects to be taxed as an s-corporation will not be taxed at the corporate level, but the shareholders will be taxed for their profits from the company which will flow through to each shareholder’s personal tax return.
* Personal asset protection from the company’s liability
* Employment Tax benefit
* Obtain separate credit from shareholder
* Greater credibility as a business
One of the advantages of a corporation over an LLC are the employee tax benefits. Unlike a limited liability company, only salaries taken by shareholders will be subject to self-employment taxes (social security and medicare).
Any dividends distributed to the shareholders of an s-corporation will be taxed at each shareholder’s personal tax rate. A shareholder of an s-corporation must be in individual who is a U.S. citizen or resident of the U.S. A maximum of 100 shareholders is required in order to qualify as an s-corporation.
Finally, as a corporation, it may be a simpler task for the company to obtain credit separate from its shareholders and allow the business to have greater borrowing power as a stand alone company.
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*The information provided on this web site is for general information only. If you need legal advice, please consult an attorney. Paralegal Consultants, Inc. is an Arizona Certified Legal Document Preparer, certified by the Arizona Supreme Court. An LDP (formerly known as an independent paralegal) is neither an attorney nor employed by an attorney and therefore, we cannot provide legal advice, opinions, or recommendations to you. However, an LDP may provide general information pertaining to the documents being prepared on behalf of the client. *Providing service in Scottsdale, Phoenix/metro, and Tucson, Arizona. Mail service available state wide in Arizona. *