Law & Accounting Offices of Stanley F. Bronstein
Scottsdale, AZ 85260
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A corporation is a business or organization formed by one or more persons.
It has rights and liabilities separate from those of the persons involved. Persons can be not only individuals, but also other entities.
A for profit corporation is organized for a business which will be making a profit. Corporations are C Corporations by default, unless the Corporation timely elects with the Internal Revenue Service ( IRS ) to obtain Subchapter S status (which means they will be taxed in a manner similar to a partnership).
Non-profit corporations engage in activities and businesses for the public good. Many non-profit organizations are required to apply with the IRS to be granted non-profit / tax-exempt status.
Under the law, a corporation has many of the same rights and responsibilities as an individual. Corporations may buy, sell and own property. They are allowed to enter into leases and contracts, and file lawsuits. Corporations can be prosecuted and fined if they break the law.
One advantage of forming a corporation is that a corporation can exist indefinitely, beyond the lifetime of any one shareholder.
Each state has the power to promulgate laws relating to the creation, organization and dissolution of corporations. Anyone considering incorporating should hire a law firm that is familiar with both federal and state laws governing corporations.
Many of the companies advertising on the internet wanting to form your corporation will simply take your information (and your money) and form the entity. They offer no legal or tax advice and when they give you documentation, they will often tell you to consult with your legal or tax advisor. We find this to be ironic, as we believe it is the job of your legal and tax advisor to form the corporation for you in the first place. That way you could have the assistance of a knowledgable advisor from the very beginning, and find out the legal and tax consequences of your proposed actions before you make a mistake or form the wrong type of entity.