Frequently Asked Questions
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Business Matters
- Why should my business incorporate?
- Should our business be incorporated in Nevada or Delaware?
- What is an S Corporation?
- What is a transaction?
- What are some examples of transactions?
Estate Planning
Why should my business incorporate?
Separate your business from your personal assets. Your business shouldn't jeopardize your hard earned profits, your home, or your family.
Corporations limit their owner's liability up to the capital they invest. As long as owners treat their corporation as a separate entity, it is very difficult to sue them personally for the acts of the corporation.
In addition to acting like a shield for the owner (corporate shareholder), there are possible tax advantages. Some owners may benefit by establishing benefit plans and others may be able to reduce their self employment tax.
Should our business be incorporated in Nevada or Delaware?
In most instances, there is very little benefit for a California business to incorporate outside of California. If you are a national public company or do a substantial portion of your business in other states, then it might be helpful.
If you are a foreign corporation, you must still qualify to do business in California, you are subject to state franchise taxes and California corporate law may supersede the laws in the state of incorporation.
One of the most important financial decisions for small corporations is whether to elect federal income tax treatment under IRC Subchapter S (IRC §§1361-1379), if it has that option available to it. Corporations electing Subchapter S are referred to as "S corporations," and corporations that are not S corporations are referred to as "C corporations," in the Internal Revenue Code. IRC §1361(a). S corporation treatment is similar (but not identical) to partnership treatment. If a corporation elects S corporation treatment, all the corporation's shareholders are bound by the election.
To become an S corporation, a company must file an "S election" with the Internal Revenue Service under IRC §1362.
This issue should be discussed with your attorney and tax advisor.