What is a corporation? A corporation is a separate legal entity formed by individuals and/or other business entities for the benefit of limited liability, asset protection, tax savings and ease of ownership. The owners of a corporation are shareholders, the managers are known as officers and directors.

What is a limited-liability company? A limited-liability company (LLC) is also a separate legal entity formed for limited liability and asset protection purposes. The owners of an LLC are called members and the management is referred to as managers. LLCs are frequently used for holding real estate and other personal assets.

What is a limited partnership? A limited partnership (LP) is a separate legal entity formed for limited liability and asset protection purposes. The owners of an LP are known as general and limited partners. The management resides exclusively with the general partner. While the limited partners are limited in their liability, the general partners are personally liable for the LP activities. This unlimited liability can be resolved by forming a corporation or LLC to be the general partner.
Because Limited Partnerships require a greater level of assistance in their formation Sutton Law Center charges a slightly higher fee for the formation of an LP.

Am I personally liable for the corporation’s, LLC’s or LP’s obligations? If structured properly, the liability of the owner is limited to the amount of their investment in the entity. Thus, the personal assets of the owner will be protected against any business claimants.

What are the tax benefits? There are many tax benefits to using a corporation, LLC or LP. Many business expenses are easily written off, and in the right structure, pre-tax dollars can be used for valuable benefits packages. As well, the risk of an IRS audit is lower with business entities. A CD entitled “How To Save $10,000.00 by Incorporating” is available for $29.00 from Sutton Law Center. This CD is given as a free gift on all new entity formations.

What is a C corporation? A C corporation is a corporation that is taxed at two levels. First, the corporation pays corporation taxes on corporate profits. Then, with any money left over, the corporation may distribute profits to the shareholders. These profits, or dividends, are taxed to the shareholders. Thus, resulting in “double taxation”. The “C” refers to an IRS code section. Despite the double taxation, C Corporations offer many planning and benefit opportunities.

What is an S corporation? An S corporation is a corporation that has elected to be taxed as a flow though entity (similar to an LLC or LP). The “S” also refers to an IRS code section. Providing for this type of taxation, the S election allows the shareholders to be taxed only at the individual level instead of at both the corporate and individual level, thus avoiding the double taxation like the C corporation. The S corporation still provides limited liability protection and is a good entity for many business situations.

What is an Employer Identification Number (EIN)? An EIN is like a Social Security Number for a business. The IRS assigns such a number to each newly formed entity. It is used as an identifier when opening bank accounts, hiring employees and the like.

What are Corporate Formalities? In order to maintain the limited liability protection afforded corporate entities certain minimum formalities must be met. These include filing statements and paying annual fees, maintaining a resident agent and keeping corporate minutes. Failure to follow these formalities can result in personal liability to officers, directors and shareholders.

What is a Resident Agent? Each state requires that a resident (or registered) agent be identified and located in the state of incorporation and any states where business is conducted. The resident agent's job is to accept service of process (i.e., notice of a lawsuit) and other official notices. Because lawsuits are served on the resident agent it is important to use a service that is professional, appreciates the importance of such notices and will be in business for the long-term. Sutton Law Center provides resident agent services for $125 per year (free to new entities for the first year). This allows for free membership in the Altacian Executive Club, with over $500 in valuable annual benefits.

What are Corporate Minutes? Most every state requires that the owners and managers of an entity meet once a year to discuss the affairs of the business. To prove that this required meeting took place, minutes detailing decisions made at the meeting are written and kept with the corporate, LLC or LP records. Sutton Law Center provides minute preparation services for a modest fee of $150 per year.

What is Corporate Notice? An important element in using a corporation is providing the public with notice that they are doing business with a corporation. To that end, you will use Inc., LLC or LP, for example, on all of your brochures, contracts, checks, cards, and the like.

What is involved with naming an entity? First, you cannot use the name of a corporation, LLC or LP that is already in use and registered with the state. While Sutton Law Center will perform an initial name search to minimize this issue it is helpful to have several names in mind for possible use. Second, if you are going to organize in one state and qualify in another state the name should be available in both states. Third, a corporate name should not be confused with a trade name or trademark. While you may be able to incorporate using one name you will not automatically, without filing for trademark protection, be protected in using your corporate name as a trade name. For trademark assistance you can access http://www.sutlaw.com.

Why would a person form an entity in one state and then qualify in another state? Many people will form an entity in Nevada for the privacy and asset protection benefits and then qualify to do business in their home state, California, for example. The qualification process involves having our Nevada office; for example, provide a certificate of good standing for the Nevada corporation and then file with the California Secretary of State for permission for the Nevada corporation to do business in California. It is not an overly complicated process, but it is an important process to ensure that your entity's limited liability protection follows you into the states in which you actively conduct business. Sutton Law Center provides the qualification service for $395 per entity, plus applicable state filing fees.

How expensive is it to form and maintain a corporation, LLC or LP? Sutton Law Center provides affordable entity formation and maintenance services. As our fee sheets indicate, given the risks associated with doing business and holding real estate as well as the possible loss of personal assets, the benefits of limiting liability and protecting assets for a very affordable price are quite substantial. Click here for our formation fees