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A corporation is a legal business entity which has its own privileges and liabilities separate from those of its members. There are different forms of corporations.

General Corporation:
A general corporation is one of the most common corporate structures used in America today. It is a separate form of entity owned by the owners and/or stockholders of the company.

A general corporation can have one or more owners who are protected from creditors of the business. Personal assets belonging to owners of the corporation are also protected from business debts. And under normal circumstances, personal liability is limited to the amount of investment in the company made by the owners.
 Although there may be many benefits from forming a corporation, doing so can sometimes become complicated as well. Furthermore, it is much more expensive to form a corporation than it is to form a sole proprietorship or a partnership.

But if you’re going to have more than one employee in your business, then forming a corporation may be the right move for you.

NOTE: You do not need an attorney to form your corporation. You can do it yourself for free by simply filling out the forms and sending in the correct filing fees. However, you can also hire business service providers to set up your corporation for you.
S Corporation

An S corporation (S-Corp) is a corporation entity that is taxed under the Subchapter S of Chapter 1 of the Internal Revenue Code.

Yet in general, S corporations do not pay any federal income tax. Instead, income and/or losses are divided among its owners. This process is known as single taxation.

Members must then report that income or loss on their own individual tax returns. But if the corporation is taxed as a C corporation then it will be taxed with a double taxation.

However, an S Corporation combines some of the benefits of a sole proprietorship and a partnership as well. And tax rates for an S Corporation are lower compared to that of a C corporation.

To file and register your corporation as an S-Corp you’ll need to request a Form 2553 S-Corp election form from the Department of Corporations for your state. Fill it out and send it in along with the correct filing fees.

When starting a simple internet business from home, it is not necessary to incorporate, especially when there’s just one owner and operator. But if you’re going to incorporate then you may be better of incorporating as an S-Corp rather than a C-Corp structure.
C Corporation

A C Corporation (C-Corp) is a corporation entity that is taxed separately from its owners. And most major companies in America are formed as C corporations.

Furthermore, there is no liability for partners or shareholders within a C-Corp. Instead, the C Corp itself becomes responsible for the debts and liability of the business. And when it comes to taxation, tax rates are based upon profits. In other words, the more you earn, then the more you pay in taxes.

For example, a C-Corp earning $50,000 per year is taxed at a rate of 15%. However, a C-Corp earning $10 million per year net profit is taxed at a higher rate of 35%.

Furthermore, not only does the C-Corp pay taxes, but the owners and partners of the C-Corp must pay taxes on their personal earnings from the business as well. This is what is known as double taxation.

However, if you are the owner of the business then you can reduce the amount of the earnings which you receive from the business as your pay and therefore pay lower income taxes.

To form your corporation as a C-Corp, you’ll need to file your articles of incorporation with the Department of Corporations for your state.

A Form 1120 U.S. Corporation Income Tax Return and a Form 1120-a U.S. Corporation Short-Form Income Tax Return will have to be filed for personal income tax and business taxes as well.

Is it necessary to set up your business as a corporation?

No - not if you’re the sole owner and operator of the business, and there are no other partners involved.

However, if you’re going to start your business with partners or plan on adding employees, then setting up your business as a corporation may be the best way to go.
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Main Article Index Page
How to Succeed in Your Online Store Business
How to Start Your Online Store Business
How to Choose Your Niche Market
How to Create an Effective Business Name
Check for Domain Name Availability
How to Register Your Business Name
Should You Use a PO Box or Home Address
How to Choose the Right Business Entity for You
Sole Proprietorships Explained
Corporations Explained
Partnerships Explained
Limited Liability Companies Explained
Incorporate Your Business Online
How to Obtain Your Sales Tax License
The Best Selling Products Online (Intro)
1. Books
2. Computers, Computer Hardware
NEW:Start a Computer Reseller Business Online
3. Computer Software
4. Consumer Electronics
5. Apparel, Clothing
6. Toys/Video Games
7. Videos DVD’s
8. Health and Beauty
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15. Footwear, Shoes
16. Small Appliances
17. Tools and Garden
18. Gifts
About Distribution
Choosing the Right Distributors
How to Get Signed-Up With DropShip Distributors
Books Distributors, DropShippers, Wholesalers
Computers, Hardware, Software DropShippers
Apparel, Clothing Distributors, DropShippers
Toys/Video Games DropShippers, Wholesalers
Video DVD  DropShippers, Wholesalers
Health and Beauty Distributors, DropShippers
Consumer Electronics DropShippers
Music Distributors, DropShippers, Wholesalers
Jewelry Distributors, DropShippers, Wholesalers
Office Supply Distributors, DropShippers
Linens/Home Décor DropShippers, Wholesalers
Flowers Distributors, DropShippers, Wholesalers
Sporting Goods Distributors, DropShippers
Footwear, Shoes Distributors, DropShippers
Small Appliances DropShippers, Wholesalers
Tools and Garden DropShippers, Wholesalers
Gifts Distributors, DropShippers, Wholesalers
How to Find More DropShippers, Wholesalers
How to Open Your Online Store
How to Build Your Own Online Store
How to Build Effective Product WebPages
Building Your eStore with Website Templates
Designing, Planning and Organizing Your eStore
Implementing Graphic Elements
How to Create Your Own Company Logo
Create Search Engine Optimized Product Pages
How to Create a Content Rich Website
Choosing Your Web Host Provider
Create a Search Engine Optimized Domain Name
Check for Domain Name Availability
Top Web Building Software Programs
Top 10 Web Host Providers
Top 10 Complete eCommerce Solutions
Top Website Developers
All About Shopping Carts
All About Payment Processing
All About Merchant Accounts
Using PayPal as a Payment Processing Solution
More Merchant Account Providers
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Setting Your Prices
Setting Shipping Charges
Maintaining Your Online Store
Your Internet Marketing Master Plan
All about Search Engines
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Search Engine Optimization Guide Pt.1
Search Engine Optimization Guide Pt.2
All about Building and Exchanging Links
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Dealing with Customers
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Paying for Products with Your Customers’ Money
How to Collect Sales Tax for Internet Sales
Avoiding Credit Card Fraud
How to Ship International and Overseas
How You Get Paid Each and Every Day
Dealing with Product Returns and Exchanges
Sample Return Policy and Procedures
Sample Privacy Policy
Sample Terms and Conditions Policy
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