CORPORATION or LLC?

The size of your business is a big factor in selecting the legal structure.     Incorporation should be considered if the business has enough assets to warrant the costs of incorporation and the added governmental regulation and reporting.  If you want the limited liability that a corporation provides but not the strict regulation then an LLC may be what you are looking for.   Follow the links in this article to register your business in Michigan and to download needed IRS forms and helpful IRS publications.

·        Corporations (C Corporation)

·        Subchapter “S” Corporation

·        Limited Liability Company (LLC)

What laws will

affect me?

Which tax forms will I
have to file?

More Business Structures

Do not undertake a more complex legal structure than is necessary. You can always change structures as the business grows. 

Corporations (C Corporation) 

A corporation is a legal entity with its own rights, privileges and liabilities, apart from those of the owners of the corporation.  It is the most complex form of business organization.  Corporations are comprised of three groups of people - shareholders, directors, and officers.   In forming a corporation, shareholders exchange money and property for the corporation's capital stock.  The corporation can own assets, borrow money, and carry on business functions without directly involving the owner(s) of the corporation. Corporations are subject to more government regulation than proprietorships or partnerships. 

Incorporating is one of the best ways a business owner can protect their personal assets.   Incorporation provides greater business flexibility and makes it easier to raise capital.  None of the shareholders in a corporation is obligated for the debts of the corporation.  Creditors are paid from the corporation's assets.  The corporation files its own tax return and pays taxes on its income.  The corporations earnings are subject to "double taxation.” Profits are taxed to the corporation when earned.  Then the corporation distributes earnings in the form of dividends to shareholders.  Shareholders pay taxes on those dividends even though the corporation has already paid taxes on its earnings.   Shareholders cannot deduct any losses of the corporation.

In order to form a profit or nonprofit corporation, "Articles of Incorporation" must be filed with the Bureau of Commercial Services, Corporation Division, at (517) 241-6400.  Copies of forms, statutes, and publications are available online.  If you are a corporation use the information in the charts below to help you determine some of the forms that you may be required to file.

Corporations (C Corporation)

Subchapter “S” Corporation

 "S" Corporations are treated as a partnership for tax purposes but are treated as a regular corporation for other purposes.  “S” Corporations avoid double taxation.  An S corporation is exempt from most federal income taxes.  Shareholders include their share of the corporation's income, deduction, loss, and credit, on their individual tax returns.

A special section of the Internal Revenue Code permits a corporation to be taxed as a partnership or sole proprietorship, at the individual rather than the corporate rate. To qualify as a Subchapter "S" Corporation, a business must meet certain requirements.  For information about this status and how to apply, contact the IRS at (800) 829-3676 or look for forms 2553 and 1120S on the IRS web site.   Articles of Incorporation are filed with the Bureau of Commercial Services, Corporation Division at (517) 241-6400. Copies of forms, statutes, and publications are available online.  If you are an S corporation use the information in the charts below to help you determine some of the forms that you may be required to file.

“S” Corporations

Return to Business Structures

Use Our Business Planning Services

The affordable, professional way for you to get the loan you need now!