- Service fee from
- $449
- State fee
- Separate, varies by state
- Includes
- Bylaws, resolutions, share register
- Elections
- S corporation filed inside its window
Form a corporation, and structure it properly
A corporation is more machinery than most businesses need. When you do need it, for investment, for equity, or for an S corporation election that saves real money, the details of how it is set up matter far more than the filing itself.
- Wrong reason to incorporate
- Because it sounds more established than an LLC
- Right reasons
- Outside investment, employee equity, or a defensible salary and distribution split
Two very different reasons to incorporate.
The first is investment. If money is coming from a fund, an angel syndicate or an accelerator, you will be asked for a Delaware C corporation with a conventional share structure, and arguing about it wastes goodwill you will want later. Converting from an LLC at that point is possible and it is expensive, so if a raise is genuinely on the horizon, starting here is cheaper.
The second reason is tax, and it applies to a completely different kind of business. A profitable owner operated company can elect S corporation treatment, pay the owner a reasonable salary, and distribute the remaining profit without self employment tax. Done properly, at the right profit level, it saves meaningful money every year. Done carelessly, with a token salary and no payroll records, it invites exactly the scrutiny it was meant to avoid.
Those two situations pull in opposite directions, and a filing service that asks you to pick from a dropdown cannot tell them apart. That is the part we actually do.
C corporation and S corporation, side by side.
These are not two entity types. They are two federal tax elections available to the same state law corporation, and an LLC can make either one too.
| C corporation | S corporation | |
|---|---|---|
| Who pays the tax | The company pays corporate tax. Shareholders pay again on dividends received. | The company generally pays no federal income tax. Profit and loss pass to shareholders in proportion to shares. |
| Who can own it | Anyone, including foreign persons, other companies and funds. Multiple share classes allowed. | Only US citizens and residents, capped at one hundred shareholders, and only one class of stock. |
| Owner compensation | Salary through payroll, plus dividends if declared. | A reasonable salary through payroll is mandatory. The remainder can be distributed without self employment tax. |
| Best suited to | Businesses raising outside investment, issuing equity to employees, or retaining profit to reinvest. | Profitable owner operated businesses where the salary and distribution split saves real money. |
| The catch | Profit distributed to owners is taxed twice. | Payroll must be run properly and the salary must be defensible. A nominal salary invites scrutiny. |
- Most missed
- The S election window, and the organisational meeting
What has to happen after the filing.
A corporation that has filed but never organised itself is the most common defect we find when reviewing companies formed elsewhere.
Structure
Decide the share structure before the filing, not after.
How many shares are authorised, how many are issued, at what value, and to whom. Getting this wrong is not fatal but unpicking it later involves amendments and sometimes a valuation. If a co founder is joining in six months, we set it up now so that they can be added cleanly.
Decided at intake, in writing, before anything is filed.
Filing
File the Certificate or Articles of Incorporation.
The document that creates the corporation. It names the registered agent, states the authorised shares, and in some states names the incorporator and the initial directors. We sign as incorporator where the state permits it.
Turnaround same day in Delaware, longer elsewhere.
Governance
Adopt bylaws, appoint directors, issue the shares.
A corporation that has filed but never held its organisational meeting is a corporation on paper only. Bylaws, first directors, officer appointments, share issuance and the stock ledger all belong to the same afternoon of work.
Included, drafted rather than templated.
Elections
Make the tax election inside its window.
The S corporation election has a deadline measured from the start of the tax year in which it takes effect. Miss it and the corporation is a C corporation for that year. This is one of the most common expensive oversights we see in companies formed by filing services.
Diarised and filed by us when the election is right for you.
Payroll
Set up payroll before you take money out.
In an S corporation, owner compensation must run through payroll. Taking distributions all year and reclassifying in December is a pattern the IRS recognises. Payroll registration in the right state has to happen first, and it is not instant.
Handled in house if you use our payroll service.
Records
Keep the corporate record book alive.
Annual meetings, minutes, the share register and resolutions for significant decisions. Tedious and genuinely load bearing: the corporate record is what evidence looks like when the separation between you and the company is questioned.
Maintained as part of our compliance service.
Common questions
If you are raising venture capital or issuing stock options, a Delaware C corporation. If you are a profitable owner operated business and the salary and distribution split saves more than payroll costs, an LLC with an S corporation election usually gets you the tax result with less ceremony. If neither of those is true, an LLC is nearly always simpler and cheaper to run. We work the numbers before we advise.
Predictability. Delaware corporate law is unusually well developed, the Court of Chancery hears business disputes without a jury and produces a large body of settled case law, and the state's filing office is fast. None of that helps a business with no investors, which is why Delaware is the wrong default for most companies and the right one for a specific few.
A C corporation, yes, without restriction. An S corporation, no. S corporation shareholders must be US citizens or residents, which rules out the election for most founders living abroad. That single rule shapes a great deal of the structuring advice for international clients.
What you would have to pay somebody else to do your job, given your industry, hours, experience and the company's revenue. There is no safe harbour percentage, whatever you read. We document the reasoning at the time the salary is set, which is what matters if it is ever examined.
Nothing, until it matters. Then a creditor or an opposing lawyer argues the corporation was never operated as one, and asks a court to look through it to you personally. Minutes are cheap insurance against a low probability, high cost event.
Not sure whether you need a corporation?
Most people who ask do not, and we will say so. The ones who do need it usually need it set up more carefully than a form allows.