No, an attorney is not a legal requirement. You can prepare
and file the articles of incorporation yourself; however, you need to be knowledgeable
in the laws of the State of Texas.
You can use our service to form your corporation and save money on attorney's fees.
However, if you are unsure of what entity would be most beneficial to your business,
consult an attorney or accountant.
The main reason why people incorporate is the limited liability
that a corporation offers, meaning that if your business is not doing too well your
personal assets are protected from creditors and lawsuits.
A corporation is a separate legal entity created by the state at
the request of individuals. In the eyes of the state and the public a corporation is a
separate person and not an extension of its owners.
C-Corporations and S-Corporations are formed in exactly the same way.
The same filing procedure is used for both types of businesses within the State of Texas. However,
an S-Corporation must fill in an additional tax form that will give the S-corporation a special
tax status with the IRS. This special tax status enables S-corporations to avoid paying corporate
income tax, C-corporations must pay corporate income tax.
The typical corporation is tiered meaning that the management
structure comes in the form of layers. A corporation is owned by its stockholders and typically
they do not manage the business, instead they elect the board of directors.
The board of directors
is responsible for important management decisions such as hiring a manager who
will run the day-to-day operation of the company. These managers include the president,
vice-president, secretary and treasurer.
An S-Corporation is a C-Corporation that has elected a special
tax treatment with the IRS. Normally C-corporations pay corporate income tax on the income
they generate, the remainder of the after tax income is then distributed to the shareholders
as dividend, the dividend is then taxed as personal income to the shareholders. This
situation is referred to as double taxation, S-corporations address this issue by avoiding
the corporate income tax on the income that the corporation generates. In other words the
income an S-Corporation generates is not taxed. Instead the income flows directly to the
shareholders (owners) income tax returns and is taxed there as personal income. However
there are restrictions imposed on S-corporations, for more information
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Both forms of business entities eliminate double taxation ie
both offer the benefits of pass through taxation. However an LLC is much more flexible
and does not have the restriction that an S-corporation imposes.
The main advantage of a corporation is
the limited liability it offers its shareholders (owners).
Normally shareholders are not liable for business debts beyond
what they have invested in the business.
A corporation is a separate legal entity
and does depend on its owners, a corporation will continue to
exist if one or more of the owners die.
The ownership of a corporation can be
easily changed by the sale of shares.
Employees can be given a share of the
business via stock options.
