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Corporations, Limited Liability Corporations, Incorporations, Subchapter S Corporations Entity, Subchapter C Incorporations Entity
Advantages & Benefits

Separate Legal Entity Status
A corporation is a separate legal entity existing under authority granted by state law. It has its own identity separate and apart from its shareholders/owners.

Broad Range of Powers
As a separate legal entity, a corporation has the power to act in any way permitted by law and by its own corporate charter. For example, a corporation can enter into contracts, buy and sell both real and personal property, sue and be sued, and can even be responsible for breaking the law (i.e. committing a crime).

Small Claims Court
In most jurisdictions, any officer or director or employee can appear in small claims court on behalf of the corporation.

Separate Liability for Corporate Debts
As a separate legal entity, a corporation is responsible for its own debts. Normally, shareholders, directors, and officers are not responsible for corporate liabilities. If the corporation suffers losses, the corporation itself must bear those losses to the extent of its own resources, and not the personal assets of the individual shareholders. In effect, however, shareholders indirectly bear these losses by a decline in the value of the stock they hold in the corporation.

Note however, that shareholders, directors, and/or officers may be held liable for the debts of the corporation where the court imposes "alter-ego liability" or where the individual has personally guaranteed the corporate debt.

Perpetual Duration
A corporation is capable of continuing indefinitely. Its existence is not affected by the death or incapacity of shareholders, directors, or officers of the corporation.

Duration of Corporation Compared to LLC An LLC has a limited existence. Absent a contrary agreement, a limited liability company (LLC) is dissolved upon the death, withdrawal, or bankruptcy of a member unless the business is continued by unanimous vote of the remaining members. Although the operating agreement can be drafted to avoid such a result, the life of the LLC is still limited to the termination date in the Articles of Organization.

The Disadvantages of Incorporating
Corporate Formalities A corporation can be created only by compliance with General Corporation Law of the state of incorporation. This usually requires filing of Articles of Incorporation with the appropriate state entity (usually the Secretary of State) and payment of the requisite state fees and taxes.

A corporation is required to have a board of directors, corporate officers, annual shareholders meetings, and to maintain separate books and records. Failure to observe such formalities may result in the personal liability of shareholders for corporate debts. However, where the corporation has only one shareholder, many states allow that one shareholder to act as director and all officers (President, Secretary, and Treasurer).

Form A Corporation
Form a Corporation online, click here


Form A Corporation
Form a Corporation online, click here

Regular Corporation Advantages

Shareholders (the owners) enjoy personal limited liability.
It is generally easier to obtain business capital than with other legal structures.
Profits may be divided among owners and the corporation in order to reduce taxes by taking advantage of lower tax rates.
The corporation does not dissolve upon the death of a stockholder (owner) or if ownership changes.
Favorable tax treatment for employee fringe benefits including medical, disability, and life insurance plans.
70% of any dividends received by the corporation from stock investments are deductible (unless you purchased the stock with borrowed money).

Regular Corporation Disadvantages

More expensive and complex to set up than other legal structures.
Completing tax returns usually requires the help of an accountant.
Double taxation on profits paid to owners (corporation pays corporate taxes on profits and owner pays personal taxes on dividends from the corporation).
Recurring annual corporate fees.
Tax rates are higher than individual rates for profits greater than approximately $75,000.
28% accumulated earnings tax on profits in excess of $250,000.
Business losses are not deductible by the corporation.

S-Corporation Advantages

Owners enjoy personal limited liability as in a regular corporation.
No Federal income tax liability, and in most cases, no state income tax.
Profit/losses are passed to owners ... no double taxation.
The S-corporation does not dissolve if one of the owners dies or otherwise leaves (like a regular corporation).
Wholly owned subsidiaries are permitted.

S-corporation Disadvantages

Assistance is required to set up.
Maximum of 75 shareholders.
Only one class of common stock is permitted (no preferred stock)


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