Corporations

Which State or States to Form a Business Entity?
Generally speaking, entrepreneurs incorporate their business in the state where they conduct their business. If you live and work in New Hampshire, for example, you would incorporate your business in New Hampshire. If your business conducts business throughout the United States, you need to incorporate in the state where your headquarters will be. If you have a substantial business presence in another state, you may need to let that state know and file state tax returns or sales tax returns based on your business earnings in that other state.
Businesses with substantial nationwide activity sometimes choose to be incorporated in Delaware or Nevada because of the business-friendly laws in those states. Even if you incorporate in Delaware or Nevada, you will still need to register your business in those states where you have an actual business location. http://taxes.about.com/od/taxplanning/a/incorporating_2.html

​All Corporations and LLCs generally shield their shareholders from personal liability arising from business debts and business lawsuits.
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S-Corporation

Similar to C-Corp, with some advantages for qualified small businesses.

Advantages
  • Limits personal liability from business debts and business lawsuits
  • Potentially favorable taxation; avoids the "double tax" of a C-Corp
  • May also avoid the "self-employment tax" that is common for most LLCs
Disadvantages
  • No more than 100 company shareholders
  • All shareholders must be U.S. citizens or lawful permanent residents and not other corporations or LLCs
Companies that choose to be S-Corporations are often:
  • Selling products (retail, wholesale)
  • Selling services with employees and or independent contractors
    Service companies with no employees are often LLCs

Limited Liability Corporation (LLC)

Newest type of company with the most flexible management structure.

Advantages
  • Limits personal liability from business debts and business lawsuits
  • No restrictions on ownership
  • Formation and ownership requirements are less stringent than with C-Corp or S-Corp

​Disadvantages
  • Some states require LLCs to have more than one member
  • Transferring ownership is more complicated than with C-Corp or S-Corp
  • Potentially higher taxation than S-Corp

Companies that choose to be LLCs are often:
  • Service companies where the owner is providing a service, e.g. graphic/website design, dog walking, cleaning services
  • Real estate investment companies
  • Smaller companies with international investors
  • Smaller companies with entity investors
  • General investment companies

C-Corporation

Traditional and most common type of corporation, generally taxed more than S-Corp or LLC.

Advantages
  • Limits personal liability from business debts and business lawsuits
  • No restrictions on ownership
  • Easy to transfer stock
  • C-Corporations can offer public stock
  • Formation state fee may be less than LLC
​Disadvantages
  • Profits are "double taxed" meaning taxed at corporate and individual level

Companies that choose to be C-Corporations are often:
  • Large companies
  • Publicly traded companies

Non-Profit Corporation

Oldest type of company with the least flexible management structure.

Advantages
  • No taxation
  • No personal liability from business debts and business lawsuits
  • No restrictions on ownership
  • Formation and ownership requirements are less stringent than with C-Corp or S-Corp
     
Disadvantages
 
  • Must file for a tax waiver [501(C)3 or 501(C)4].
  • Most states require NPOs to have more than one member
  • Transferring ownership is more complicated than with C-Corp or S-Corp or LLC.

Companies that choose to be Non-Profit are often:
  • Service companies where the owner is providing a service, e.g. Youth Programs, Wellness, Elderly services
  • Advocacy Programs
  • Religious and Spiritual Organizations
  • Social Services
  • Health and Wellness Programs