No, but you might want to. Forming an LLC or S Corp helps protect your personal assets. It also unlocks the ability for you to open bank accounts, enter into contracts, hire employees, and get business licenses and permits.

The biggest difference is how they are owned. LLC’s have one or more individual owners (called members) and corporations have shareholders and more formal record keeping and reporting requirements. Even though LLCs are considered easier to start and maintain, investors tend to prefer corporations.

It ensures that you and other shareholders aren't personally on the hook for company debts and liabilities. However, it is important to ensure you are not mixing business and personal matters. Especially income and expenses, banking, etc. Once this is done, the business loses the corporate veil that separates and protects the owner from becoming personally responsible for business liabilities. This Is Why proper bookkeeping is so important, it ensures the personal and business transactions are not co-mingled thus protecting the owner and keeping the corporate veil in place. For more information about our bookkeeping services CLICK HERE!

You choose. Single-member LLCs can file as a sole proprietor. Multi-member LLCs can file as a partnership. Any LLC can file as an S corporation by submitting form 2553 to IRS and receiving approval.

The biggest difference is the way you are taxed and how shares are distributed. Have you ever heard the term “double taxation?” This is where a corporation is taxed on its net income and then the owners also pay taxes on the profits they receive. Thus “double taxation.” C corporations are double taxed while S corporations are not.

C corporations have no limits on how many people and who can own shares. S corporations are limited to 100 shareholders who must be U.S. citizens or residents.

C corporation owners may get preferred stock—which comes with no voting rights but priority to dividends before common shareholders. S corporation owners can only get common stock which comes with voting rights.

Most of our customers choose to be an S corporation. However, you can become a C corporation later if you choose to.

Your ownership of the business is calculated by the number of shares you own. Even if you start the business, if you do not own a majority of the shares, you do not have full authority over the business.

There are two main types of shares "common" and "preferred.” Common shareholders have voting rights and can receive dividends if they're issued. Preferred shareholders have priority over common shareholders when it comes to dividends and payout claims (if the corporation becomes insolvent).

You need to file form 2553 with IRS.

You need to apply for a new EIN and select corporation. Note, you will be responsible to update any accounts with the previous EIN to the new one. This includes banks, loans, etc.

You need a majority shareholder consent to switch before you can change your status with the IRS. Then you would apply for a new EIN just as with an LLC.

Large public corporations or those planning to go public can benefit from things like Delaware's well-established and predictable body of corporate law—aka how courts tend to resolve business disputes. Venture capital firms and angel investors also prefer Delaware corporations. However, most small businesses form in the state where they do business to avoid added costs and complexities.

Another reason for incorporating in Delaware is for anonymity. Businesses that want to keep their members identity private will find that incorporating in Delaware provides them with this benefit. This is especially beneficial to real estate Investors with multi-units and commercial properties.

Wyoming is another state that allow for this type of anonymity and is particularly attractive to real estate investors with residential properties and tenants.

Delaware and Wyoming do not list any information on the members of the LLC, and nothing is reported to the Secretary of State. Disgruntled tenants have the potential to yelp landlords, post horrible reviews and defame the Landlords name, character, reputation, and business.

The authorized capital of a company is the maximum amount of share capital that the company is authorized by its constitutional documents to issue. In other words, the absolute amount in which the corporation may raise capital from the stockholders, and they may not go beyond this limit.