Business Formation • Incorporation

Incorporating your business gives it a life of its own.  The benefits are personal liability protection, substantial tax advantages, greater financial planning and investment flexibility, and easier transfer of ownership.  Other options to consider are C Corporations, S Corporations, Limited Liability Companies (LLC), Professional Corporations (PC), and Professional Limited Liability Companies (PLLC). 

These different business categories have different requirements for formation, taxation, liability, operational requirements, ownership restrictions, licensing, stock transferability, management structure, and more. 

A corporation, chartered by the state in which it is headquartered, is considered by law to be a unique entity, separate and apart from those who own it. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions.  Both C and S Corporations are offer the same limited liability protection, the owners are typically not personally responsible for the debts and liabilities of the business.Both entities hold annual meetings of shareholders and directors each year and meeting minutes must be kept with the corporate records.

Their main difference is their taxation: The S Corporation is a pass-through tax entity; the income or loss generated by the business is reflected on the personal income tax return of the owners. A C Corporation, however is a separately taxable entity. The profits and losses are taxed directly to the corporation. This can lead to double taxation on dividends that are paid out of corporate profits to the owners.

A Limited Liability Company (LLC) is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. Its formation is more complex and formal than that of a general partnership.

In summary, deciding the form of ownership that best suits your business venture should be given careful consideration. 

The Arizona Business Connection of the Arizona Department of Commerce provides an online guide to determine the appropriate classification for your business. 

More information can be found at:

SBA - Basic Start-Up Information

SBA - Legal Start-Up Information

*** Coming Soon - an online list of qualified law firms that specialize in technology business incorporation and intellectual property protection ***