What should I know about forming a corporation?
This is a complex business structure with more startup costs than many other forms. A corporation is a legal entity separate from its owners, who own shares of stock in the company. It can be created for profit or nonprofit purposes, and may be subject to increased licensing fees and more government regulation than other forms. Profits are taxed both at the corporate level and again when distributed to shareholders. Shareholders are not personally liable for corporate obligations unless corporate formalities have not been observed. Observing such formalities provides evidence that the corporation is a separate legal entity from its shareholders. Failure to do so may open up the shareholders to liability of the corporation’s debts. Corporate formalities include: issuing stock certificates, holding annual meetings, recording the minutes of the meetings, and electing directors or ratifying the status of existing directors. You are advised to always use the assistance of a qualified attorney when forming a corporation.