An incorporation attorney assists with the process of forming a business or non-profit corporation. Corporations are usually formed to limit personal liability and for tax purposes. The process of incorporation can be simple or complex. Simple incorporation can usually be done by the individual forming the corporation, but complex corporations typically require the assistance of an incorporation attorney.
Incorporation attorneys ensure all the proper papers are filed, special circumstances met, and fees and reports complete. They often advise prospective business owners on whether they would benefit from operating as a sole proprietor or partner or gain more tax advantages by incorporating. If a corporation is the best option, these attorneys typically explain which type of corporation to form.
The typical types of corporations are professional, for-profit, and non-profit. For-profit corporations can be further broken down into C-Corporations, S-Corporations, and Limited Liability Corporations. Each type of corporation has specific legal requirements, as well as tax, profit distribution, and liability advantages and disadvantages. An attorney specializing in incorporation law researches these differences, remaining current on any changes in the law.
A C-Corporation is a stand-alone entity that relieves the individuals forming the corporation of personal legal and financial liability. For example, if a corporation is sued, the individual is not liable for the damages awarded to the plaintiff. The payments must come from the corporation’s financial accounts. A C-Corporation is often liable to double taxation; for example, profits are taxed first at the corporate level and then again when they are distributed to the shareholders. Incorporation attorneys assist a C-Corp with tax and liability issues, as well as the issuance of stocks and the distribution of profits.
An S-Corporation is similar to a C-Corporation, but is often promoted by an incorporation attorney when the shareholders are few and the business is a start-up. Shareholders in an S-Corp can usually claim business losses and debts against their personal taxes. Incorporation attorneys often keep an eye on the corporation’s growth and changing needs, advising conversion to a C-Corp when its benefits outweigh downsides.
An alternative to the typical organizations an incorporation attorney proposes is a limited liability corporation. An LLC generally requires much less organizational paperwork, both at formation and annually. LLCs are not required to hold annual business meetings like C and S-Corps are. One advantage to an LLC is that, if a shareholder is liable for personal debt, the creditor cannot seek compensation from the business. A creditor can generally demand funds from the business assets of a sole proprietor or partnership.
Many people file for incorporation without the assistance of an incorporation attorney. If incorporation is intended to limit personal and tax liabilities only, self-incorporation may be advisable, but if share sales and stock options are involved, most people turn to an incorporation attorney to ensure these complex operations are set up properly. Also, incorporation laws vary greatly from state to state and country to country. An incorporation attorney familiar with the local, regional, and national requirements may reduce later risk.
