Corporation Filing Archives - Global Multiservices

One of the first decisions you make when forming a trucking company is the Corporation Filing your business will take. Will it be a Limited Liability Company, Sole Proprietorship, or Corporation? The answer depends on your preferences, goal, and future growth of your business. Most business owners form corporations because it protects them against financial and legal liabilities. This is because a corporation helps separate owner’s assets and bank accounts from business assets. Corporations Filing provides businesses with many advantages, but it also has its disadvantages. These include expensive corporation filing fees, loss of business control, double taxation if it is a C corporation, and many more. Carefully analyzing the needs of your business will help you decide whether to incorporate it or not. Read on as Global Multi Services discuss the cons of corporation filing in greater detail below.

Corporation Filing

Extensive Formalities and structure

Corporations are required by law to have a set of standard formalities that governs them. These include keeping accurate records, having a board of directors, holding regular meetings, operate as a separate entity, following the company’s bylaws, and many more. These ensure the company is legally distinct, maintains its status, and runs smoothly.

Expensive Corporation Filing

One of the downsides that come with corporation filing is the expenses. They are one of the most expensive business structures to set up. Corporations are a complex structure, and many filing fees are associated with their formation. For example, in some states, Non-profits corporations must file a separate state tax exemption status to the Internal Revenue Services and pay a registration fee every year. Many states also impose an ongoing fee and an annual report fee on corporations. These fees can be costly for many small businesses.

Corporation Filing Lengthy Application Process

The application process for corporation filing is very lengthy due to extensive paperwork. Filing your article of incorporation with the Secretary of State is easy, but the overall incorporation process is often time-consuming. To establish a corporation, you need to keep details of the organization and its ownership. These include the corporation’s bylaws, board of directors, financial transactions, officers, corporation articles, meetings, shareholders, and other activities. Each state also has its corporate filing requirements and record keeping guidelines for incorporated businesses. Therefore, you need to do research on your state regulations or seek the advice of an attorney to remain in good standing with the state and law.

Double Taxation

Corporations like C-corporation face double taxation. This means the business is taxed as a separate entity and the shareholders are also taxed based on the percentage of profit they earned. The only way to avoid double taxation is by operating as a limited liability company or S-corporation.

Distinct Legal Entity

Corporation Filing takes away the control you have over your business. It is a distinct legal entity governed by a board of directors. Corporations also have federal and state rules stating who can serve on a board of directors. The board of directors can vote in other board members and vote out members. They can also take over the business leaving the founder with no say.


LLC Filing

Many factors have to be considered before I suggest you any opinion on these two. But first of all, we have to know the basic difference between An LLC and A Corporation and list out there for and against.

What is an LLC?

An LLC is an abbreviated form for a Limited Liability Company. As the name suggests, LLC sunders your assets from your business assets. So in any worst-case scenario if you suffer some loss in your business and get under debt then only the money that you have invested in your business will be used to pay off and your assets like your home, your vehicles, and other personal estates or assets will remain sound.

What is a Corporation?

It’s a legal organization that is completely discrete from you if you are one of its owners. To form a corporation you need other members, as you can not be the individual owner, and these owners or members, along with you, will be the common shareholders. One good aspect of forming a corporation is that you or any of its members will not be personally at fault for any of its loss or debts. And on the other hand, the shareholders will have access to dividends and stock inflation.

LLC Vs Corporation

There are significant differences between LLCs and Corporations, and I will be going to discuss some of those in-depth and others, that are not much important for trucking businesses, with just an overview.

Aspects of ownership in LLC and Corporation

Ownership is one of the most important things in a business, largely if I talk about trucking businesses. This one aspect can either smooth out your business or severely entangle it. Well in LLCs the owner have the liberty to give out the profit shares among its members, regardless of the financial endowment of the members to the company. So, this adds an advantage while organizing the company’s ownership.

In the case of forming a corporation, there is no individual owner but shareholders of the company. And gains and losses of the company are dispensed equally among its members. Hence there is no single sheep to be butchered when the company faces any losses.

Different Taxation for LLCs and Corporations

In the trucking business, there are a lot of expenses to deal with like permits, truck maintenance, and many more. So, what kind of taxes you are going to pay plays a key role in making profits.

I’ll be honest that when it comes to filing taxes, LLCs taxation is easier than Corporation taxation. But there are different tax advantages that these two provide.

I am estimating that many of you are unknown to the technical terms of taxation, plus it would be a lot of hassle for you to go through all those technicalities. So, I am going to cut the jargon and describe it in Lehman’s terms.

When it comes to taxation in LLCs, the profits directly go to the owner or owners, in case you have many members, and gains and losses are not announced on business levels but individual tax returns.

On the other hand, in corporations, there is a concept called Double jeopardy. Because corporate are treated as individual legal entities, they pay taxes at many levels such as taxes on profits, corporate tax, and they also pay taxes on dividends they share with the shareholders. Along with that, dividends are taxed twice, as they are not tax-deduct able like bonuses and salaries. And this leads to Double jeopardy.

Legal entity and Tax entity?

As I am taking you through taxation, legal entity and Tax entity is another widely asked query. So what’s the difference between a legal entity and a tax entity? How IRS looks at your business is termed as a Tax entity, and accordingly, you are taxed by IRS. In other words, when you are an LLC, registered under your State, you won’t be taxed by IRS as they don’t recognize the same. And for taxation, you might get considered as an s-corporation, c-corporation, or sole-proprietor. All and all, Legal entities are ordered with your state, and Tax entities are ordered with IRS. But to get an Employer Identification Number(EIN), you need to individually register your taxation structure to the IRS.  

Conclusion

I think I have made enough suggestions, for you, to end the dilemma of choosing between an LLC or a corporation. And if I suggest you, it solely depends upon the size of your trucking company and your organizing capacity that will help you choose between an LLC or a corporation. Although, a corporation requires a lot of staff, annual meetings, big taxation, and other things.

In case you are not satisfied with my suggestions, given above, I would recommend you visit our website Global Multi Services.

As we have a highly experienced team of experts who would be more than happy to help you in resolving all your queries and they will also mitigate for you the trouble of filling the paperwork of the same.