What are the main differences between a C corporation and an S corporation?

C corporations are subject to double taxation; that is, one tax at the corporate level on the corporation's net income, and another tax to the shareholders when the profits are distributed. S corporations have only one level of taxation. All of their income is allocated to the shareholders.

However, C corporations have greater tax planning flexibility and can shield shareholders from direct tax liability. In addition, S corporations are subject to limitations, such as the number and type of shareholders they can have.

LegalZoom will help you start a C corporation or an S corporation. Get started by answering a few questions about your company, and we will file your paperwork with the Secretary of State.

How do I choose a corporate name?

In general, the name of a corporation must end with "incorporated," "corporation" or an abbreviation of one of these. A name will not be accepted if it is likely to mislead the public or if it too closely resembles the name of another corporation already formed in that state. Many states also restrict the use of certain terms in a corporation's name (like bank, police or insurance).

LegalZoom allows you to choose up to three alternative names, in order of preference. We will conduct a name check before filing to see which names are available. Please note that for government purposes the names "ABC, Inc." and "A.B.C., Corp." are identical. Therefore, you should disregard spaces, periods and the corporate ending when coming up with your three name choices.

If the name of your corporation will be used in connection with goods or services, you may wish to consider obtaining federal trademark protection for the name. This helps ensure that no one else in the U.S. may use that name in connection with the same general type of goods or services (except in areas where someone else is already using that name).

Is a corporation required to have a registered agent?

Each corporation must have a registered agent (some states use the term "resident agent" or "statutory agent," but the concept is the same). This is the person designated to receive official state correspondence and notice if the corporation is served with a lawsuit. Most states require that the registered agent must be either:

(1) an adult living in the state of formation with a street address (P.O. boxes are not acceptable) or

(2) a corporation or limited liability company with a business office in the state of formation that provides registered agent services.

One of the advantages of forming a corporation or limited liability company in your home state is that any officer or director (of a corporation) or manager or member (of an LLC) can act as the registered agent. However, there are some advantages to having another person or company act as your registered agent. First, this adds an extra layer of privacy, since the registered agent's name and address are publicly available. Second, this helps limit the risk that if your corporation or LLC is named as a defendant in a lawsuit, no one will surprise you at home on a Sunday night with court papers.

How much will it cost to form and run a corporation?

Each state charges an annual fee to maintain a corporation. In many states, you must also submit an "annual report" or "list of directors and officers," which is a one-page form sent by the state. Some states also have state taxes.

What are the advantages of incorporating in Delaware?

The advantages of incorporating in Delaware according to the Delaware Secretary of State:

More than half a million business entities have their legal home in Delaware. This includes more than half of all U.S. publicly-traded and Fortune 500 companies. Businesses choose Delaware for its complete incorporation services package, which includes modern and flexible corporate laws, the highly-respected Delaware Courts, a business-friendly state government and the customer service oriented staff of the Delaware Division of Corporations.

What are the main differences between an LLC and an S corporation?

An LLC has more operating flexibility and fewer corporate formalities than an S corporation. For example, an S corporation cannot have more than 100 stockholders and must hold both periodic director's meetings and an annual meeting of stockholders. However, owners of an S corporation may be subject to fewer taxes than LLC owners.

For more information, please see "Differences Between a Corporation and a Limited Liability Company (LLC)" from the main guide.

Do I need an attorney to form a corporation?

No, you do not need an attorney to form a corporation. You can prepare the legal paperwork and file it yourself, or use a legal documentation service such as LegalZoom.

To learn more and speak with a representative, please call us at (888) 381-8758.

What is the procedure for forming a corporation, and what legal documents are required?

To create a corporation, you must file a document called the "articles of incorporation" with the Secretary of State or other appropriate state agency. Next, bylaws and organizing resolutions must be adopted. A corporation will also need to apply for a tax identification number with the IRS.

Unlike many other incorporation services which only create and file the articles of incorporation, LegalZoom can complete all of these required documents for you, including personalized bylaws and organizational resolutions.

What are the advantages of incorporating in Nevada?
According to the Nevada Secretary of State, the following details the advantages of incorporating in Nevada:
  • No corporate income tax
  • No taxes on corporate shares
  • No franchise tax
  • No personal income tax
  • No I.R.S. information sharing agreement
  • Nominal annual fees
  • Minimal reporting and disclosure requirements
  • Stockholders are not on public record
What are the naming conventions for professional corporations?

Have you ever noticed the initials "P.C." or "P.A." after a company's name? These initials indicate the company is a professional corporation ("P.C.") or a professional association ("P.A."). State law dictates what is required in the name, and those requirements differ by state.

What is a professional corporation?

Professional corporations (PC) are corporations that provide professional services. State law and the regulating board determine what constitutes professional services and when you are required to be a professional corporation. This varies from state to state.

Can I be the only shareholder in my corporation?

Yes, a corporation can be formed with only one shareholder. However, corporate formalities, such as director and shareholder meetings, are still required in order to preserve the corporate form and prevent the shareholder from personal liability.

What is a corporation?

A corporation is a distinct legal entity created under state laws which can open a bank account, purchase property, enter into contracts and operate a business. One of the most important features of a corporation is that, generally, its owners are not personally liable for the debts of the corporation.

When is a corporation considered a professional corporation?

The definition of "professionals" can vary from state to state, but typically includes professions that require a license, such as doctors, chiropractors, lawyers, dentists, accountants, architects or engineers. Depending on the state where you incorporate, the following activities may be classified as professional services.

  • Accounting and financial services
  • Architectural services
  • Legal services
  • Medical services
Where should I incorporate?

A corporation can incorporate in any of the 50 states, plus the District of Columbia.

Many people choose to incorporate in their home state, which can save money in filing fees. That is because corporations are required to register in each state where they do business. For example, a Delaware corporation that has its main business office in Arkansas must register as a "foreign corporation" with the Arkansas Secretary of State and must pay applicable fees and taxes to both Delaware and Arkansas.

Delaware is popular because of its history, experience and pro-business climate. Nevada is also popular because of its pro-business environment and lack of a formal information-sharing agreement with the IRS. Please read the next two FAQs for more specifics on each state.

Who can form a corporation?

Generally, anyone who completes the articles of incorporation and pays the state filing fee can form a corporation. There are usually no residency or other legal requirements. However, many states require that an individual forming a corporation must be at least 18 years old.