A corporation may be formed for any profit business or a nonprofit/social organization. Individuals who own shares in a corporation are called shareholders. A corporation can take two forms, depending on your tax election: 1) C-corporation or 2) S-corporation.
To qualify as an S corporation, the corporation’s shares must be limited in number and must be held by resident citizens or a qualifying trust.
A corporation may qualify as a C corporation without regard to any limit on the number of shareholders, foreign or domestic.
Some of the advantages of a Corporation include:
- The ability to establish incentive stock option plans,
- Deductions for the cost of employee fringe benefits,
- The ability to carry losses forward to offset future profits, and
- Avoidance of self-employment taxation and social security taxes on dividend distributions.
These considerations, as well as others, should be evaluated with counsel and your accountant before deciding on an entity.
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