Business Formation

A limited liability corporation offers limited liability to its owners, but may elect to be taxed as a partnership which passes all the income and losses through to its owners. S Corporation can only have 100 stockholders and the stockholders cannot be corporations or non-U.S. citizens.

Delaware Corporations and Limited Liability companies can qualify to do business in all 50 states and foreign countries.

Incorporation can provide many benefits. The most important factor is that incorporation can help limit your personal liability as a business owner. Generally, creditors of your corporation must satisfy their claims by seizing the assets of the corporation rather than your personal assets. In contrast to a sole proprietor or partner in a partnership, you are financially responsible for all liabilities of the business, and your personal assets are subject to seizure or lien by creditors. Other benefits of incorporation can include greater tax deductions for pension and retirement expensing and funding, health insurance and medical expenses, lower payments for social security tax and medicare tax, and greater opportunity to raise capital for the business through the issuance of stock.

Yes. Corporations file an annual tax return on IRS Form 1120 or 1120S and usually a simple annual state report that updates information such as the address of the corporation and the names of its current officers and directors. Annual tax returns are also filed by general partnerships on IRS Form 1065, limited liability companies are also filed on IRS Form 1065. Single member LLC's are filed on IRS Schedule C, as well as sole proprietorships on IRS Schedule C.

The corporation is owned by the shareholders. A corporation may have one or more shareholders. Generally, since the shareholders elect the persons who serve on the Board of Directors, the corporation is controlled by the shareholders. The shareholders who own more than 50% of the corporation's common stock get to make the ultimate decisions about running the corporation.

A Nonprofit corporation is one that is formed not for financial gain. It is formed to carry out the goals of the organization. The process to form a "for profit" versus "nonprofit" corporation is similar but the text of the Articles of Incorporation is different. There are no owners in a nonprofit corporation. A nonprofit corporation is controlled by a board of directors. The profits of a nonprofit corporation may not be paid to the creators of the nonprofit entity, except that the creators may receive compensation for the fair market value of actual services provided to the nonprofit. Generally, a nonprofit corporation is exempt from federal income tax, except with respect to "unrelated" business income.

SIC stands for the Standard Industrial Classification Code. It is a four digit number assigned to identify a business based on the type of business or trade involved.
The first two digits correspond to major groups such as construction and manufacturing, while the last two digits correspond to subgroups such as constructing homes versus constructing highways.
A company can determine its SIC number by looking it up in a directory published by the Department of Commerce, or by checking in the SIC book in the reference section of a local library.
SBA size standards are based on SIC codes.

Although you purchased a sole proprietorship for 1 amount, that amount must be allocated to the individual assets for depreciation purposes.
Allocation is based on the proportion of the sales price to an individual assets fair market value at the time of the sale. Speak to your local CPA about the allocation formulas.

A REMIC is an abbreviation for a Real Estate Mortgage Investment Company. Generally it holds a fixed pool of mortgages. A REMIC is not a taxable entity for federal income tax purposes. Generally, a REMIC is treated as partnership and the partners considered residual interest holders. Net income from the REMIC is passed through to the partners. The partners pass through income issued to the partner on Form 1066, Schedule Q and is reportable on IRS Schedule E, page 2.