Choosing the Best Corporation Type

This page will help you select the right corporate structure for your business (the right type of incorporation).

By choosing the right type of corporation to create for your business you’ll be ensuring you can have the optimal chances of business success. Please read over all the choices here and when you think you’ve narrowed it down to one or two – research those two options and make sure you pick the right one. It’s not a catastrophe if you pick the wrong one as you can always change it, but with some effort and attention to detail you’ll be able to choose the right format for your business.
Sole Proprietorships

  • Not a corporation, but it is a form of business ownership.
  • Owner is personally liable for lawsuits filed against the business. Owner assets can be taken in a court case against the business, yes that includes savings, cars, property, anything basically.
  • No state / national filing required to form a sole proprietorship
  • Very easy to form and operate.
  • Taxes are done on individual tax form – including business profits and losses.

Partnerships

  • Not a form of corporation. No separate legal entity is formed to protect owners from loss of personal assets in lawsuits against the business.
  • Partners are personally liable for lawsuits filed against the business.
  • There usually isn’t a state filing required to forma  partnership.
  • Easy to create and operate.
  • According to share of the company owned, the owners report their share of profits and losses in the company on their individual tax returns.

C Corporations

  • Separate entities from owners according to IRS and courts.
  • The corporation can have assets separate from your personal assets.
  • Business debts are separate from personal debts.
  • Unlimited number of shareholders allowed.
  • Taxed twice… the corporation is taxed on corporate profits and the shareholders are taxed on dividends they receive.
  • Minutes (a written record) of annual meetings must be done.

S Corporationsvery common.

  • Separate corporate entity from owners for legal and tax purposes.
  • Provides some protection of your personal assets in lawsuits against business.
  • Owners report their share of profits and losses on their individual tax returns.
  • Limits on shareholders in number, and all must be U. S. citizens or residents.
  • Annual meetings and minutes requirement.

Limited Liability Companies (LLCs) – very common.

  • Separate corporate entity from owners for legal and tax purposes.
  • Provides some protection of your personal assets in lawsuits against business.
  • Taxed similarly to a sole proprietorship or a partnership (if more than one owners).
  • Unlimited number of owners allowed.
  • No requirement for annual meetings.
  • Governed by operating agreements created within the company.

As noted, the LLC and S Corporations are very popular types of incorporation. Maybe 80% of all incorporations we do online here at StartNewJerseyBusiness.com and our other sites are of one of these two types.

If you are still unsure which corporate type is the best for your business here is a chart that shows the main features of each type of corporation in a side by side chart.

Choose corp type.

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