Online Incorporation MaxBlog

Ever browse through online incorporation articles and blogs and get confused by all of the terms they use? Maintaining focus on your business is difficult enough so having to decipher what a particular word means can be a major headache.

This is one of the main reasons why MaxFilings maintains a handy list of business incorporation terms. In addition to providing online incorporation services across the nation, the business terms list provides concise explanation of many common phrases such as apostille, liquidity, quorum, and so on.

The glossary of business terms is a small but very helpful part of the Knowledge Center at MaxFilings, an extensive resource for small business incorporation.

So the next time you want to briefly know what “pass-through taxation” means, use the glossary of business terms as your first source!

The ability to raise capital is an important issue that you must consider as an entrepreneur. In fact, the decision of which type of entity to form when incorporating your business can be determined by this point alone in some cases. It is also vitally important to consider your cash flow needs to start out so you are able to grow your business later on.

There are basically two types of financing, debt and equity.

Debt financing is where you borrow money to be repaid over a period of time with interest. Full repayment is required within1 year or less for a short-term note and more than a year for long-term debt. Also, the lender does not gain any ownership in the company but may require a personal guarantee for the loan, especially for small businesses.

Equity financing is described as an exchange of money for ownership in the company, usually though common stock. This type of financing basically allows you to raise capital without incurring debt. The inherent disadvantage however is that by issuing stock in the company, your ownership interest is diluted and loss of control is possible.

When it comes time to incorporate your business , you’ll need to consider the different characteristics regarding raising capital associated with each type of business entity. The main point of difference is whether stock can be issued to the general public or not. Online incorporation services at MaxFilings provide an easy way to incorporate your business once you choose the type of entity you will be forming.

Only a C or S corporation can issue stock to the general public. Stocks can make it easier to raise investment capital and transfer ownership, and the ability to offer stock options can assist the company in recruiting and retaining good talent. All stock issued is subject to various state and federal securities laws.

A Limited Liability Company (LLC) cannot issue common stock to the general public, but the benefit of raising capital is replaced by the relative simplicity and ease of operating an LLC. Capital is generally raised through the companies’ partners and debt financing.

Both corporations and LLCs, however, must maintain the ratio between debt and equity financing at an acceptable rate. Too much or too little of each may make it more difficult to attract investors and obtain debt financing from a lender, who may question the ability of the note to be paid back.

In the end, this decision cannot be made lightly and must involve the counsel of an attorney and accountant. However, the two main points to consider in regard to raising capital boils down to growth needs of the company and the administrative requirements of a C corporation , S corporation , or LLC .

Determining the best corporate status for your business has many considerations. When thinking about self-employment taxes however, forming an S corporation offers a clear-cut benefit over forming an LLC. This tax applies for such things as Social Security and Medicare, much like the payroll tax deducted from ones paycheck.

In an S Corporation, an individual shareholder only pays tax on salaries and bonuses they receive from the company. On the other hand, a shareholder in an LLC pays on both salaries/bonuses and their share of profit in the company, which can amount to more than 15% of taxable income.

“Can S Corporation Status Reduce Self-Employment Taxes?” in MaxFilings’ Knowledge Center addresses this issue and raises other important considerations you must be aware of.

Are you incorporating a new business?…Or looking for information on the various corporate structures available? Sometimes the jargon associated with different explanations found by general searches on the Internet can be difficult to understand.

Basically, the differences in various corporate structures lie in their tax treatment. An S corporation is a standard corporation that elects special tax status from the Internal Revenue Service through the filing of IRS form 2553.

Many of the benefits of an S corporation are the same as other corporate structures, such as:

- Limited liability of debts, obligations, and liabilities incurred by the business or stemming from legal action(s).

- Protection of shareholders’ personal assets

However, unlike a C corporation, an S corporation does not pay any income tax itself. Rather, it is more like a sole proprietorship, limited partnership, or LLC where an individual shareholder reports their share of the corporation’s income and loss on their personal tax return, also known as pass-through.

So why would you want to choose an S corporation over other options? Some points to consider:

- An S corporation is for those wanting limited liability and a formal corporate structure but with pass-through taxation of profits, thus avoiding double-taxation.

- By law, an S corporation is considered an individual entity, and separate from its owners/shareholders.

- Easier to raise capital since stock and other forms of financial securities can be issued.

Further explanation of an S corporation and the different factors to consider is described simply at the Knowledge Center at MaxFilings. And after researching with this useful resource and consulting with an attorney, MaxFilings’ online incorporation center can help you form whichever structure fits your needs.

Considering Incorporation in Delware? Think Delaware South and Delaware West

Delaware incorporation has long enjoyed a reputation as the choice for many businesses, but that is changing as other states make efforts to foster a business-friendly environment for incorporation, says a new article released by MaxFilings Online Incorporation Service.

The Delaware incorporation article looks at points that businesses should consider when deciding where to incorporate, helping you compare and contrast incorporation in Delaware, Nevada and Florida.

You may also be interested to learn when none of these states may be the best choice for incorporation. Check out the article here: Where to Incorporate: The 3-Man Fight between Delaware, Delaware West and Delaware South