Frequently Asked Questions
General "C" Corporation
The general corporation is the most common corporate structure. This type of corporation is a separate legal entity that is owned by stockholders. A general corporation may have an unlimited number of stockholders that, due to the separate legal nature of the corporation, are protected from the creditors of the business. A stockholder"s personal liability is usually limited to the amount of investment in the corporation and no more.
Sub-Chapter "S" Corporation
With a sub-chapter "S" corporation you can deduct the profits and losses from your corporation on your personal tax return. You will no longer be considered a "C" Corporation. Prior to March 15 you must file an IRS Form 1120-S. To qualify as a "S" corporation, you must be a US citizen or qualified resident filing a personal tax return with the IRS.
There are a few minor, but significant, differences between general corporations and close corporations. In most states where they are recognized, close corporations are limited to 30 to 50 stockholders. In addition, many close corporation statutes require that the directors of a close corporation must first offer the shares to existing stockholders before selling to new shareholders.
This type of corporation is particularly well suited for a group of individuals who will own the corporation with some members actively involved in the management and other members only involved on a limited or indirect level.