Corporations

Screen Shot 2022-12-13 at 3.41.02 PM.png

California Secretary of State Fees for a Corporation:

Filing of Articles of Incorporation: $5 with Certified Copy

Filing of Statement of Information: $30.00

Certificate of Good Standing: $5.00

(We can incorporate your business in most States. Filing fees vary State to State)

Corporate Binder Optional: $75.00

(Colors: Black, Burgundy, Pink, Green, Blue)

Corporate Seal

Corporate Certificates

Optional S-Corp Election $50

S-corps are considered pass-through entities, which means that your business doesn't pay taxes on the profits you earn—you, the owner do. Unlike C corps, where both the business and owners pay income taxes, an S-Corp avoids double taxation as a pass-through entity.

Document Preparation Fee $400

All business formations come with EIN (Tax Identification number)

Generic Bylaws and Minutes

First year of Agent service free (after 1 year the fee is $75 annually)

*We offer customized Bylaws for additional fee*

*We offer customized Bylaws with a Funder clause that protects the founder from being voted off of the board. Additional fee of $200.00*

Duns Number $75 (Optional)

Why Do You Need a DUNS Number? You need a DUNS number because it is required for receiving your business credit report from Dun & Bradstreet and for applying for any grants or cooperatives from the federal government.

Mandatory BOI (Beneficial Ownership Information) $45

What is the BOI?

Beneficial ownership information (BOI) reporting, as required by the Corporate Transparency Act (CTA), became effective on January 1, 2024. Many companies are required to report information to FinCEN about the individuals who ultimately own or control them. Beginning January 1, 2024, new businesses will be required to report their beneficial owner information (BOI) electronically to FinCEN. For existing businesses that were registered prior to January 1, 2024, they will have until January 1, 2025 to complete their BOI registration.

Whether you need to set up a C-Corporation or an S-Corporation, we take care of everything to form your new business entity. From start to finish, JLS Consulting Services handles all of the aspects of your corporation formation with the California Secretary of State. After the Articles or Agreement have been filed we will prepare the corporate bylaws and the corporate minutes which will be completed at the first corporate meeting, at which time the officers are appointed, the bylaws accepted and the corporate seal and stock certificates are given. Your first Statement of Information is always included. Best of all, your corporate documents will be presented to you in a leather binder embossed with the corporation’s name and complete with a corporate seal. That’s full service corporation formation.

S-Corporation vs. C-Corporation: The Similarities

The C-Corporation is the standard (or default) corporation under IRS rules. The S-Corporation is a corporation that has elected a special tax status with the IRS and therefore has some tax advantages. Both business structures get their names from the parts of the Internal Revenue Code that they are taxed under. C-Corporations are taxed under Subchapter C while S-Corporations are taxed under Subchapter S. To elect S-Corporation status when forming a corporation, Form 2553 must be filed with the IRS and all S-Corporation guidelines met.Here are some of the qualities shared by both C-Corporations and S-Corporations:

Limited liability protection: Corporations offer limited liability protection, so shareholders (owners) are typically not personally responsible for business debts and liabilities. This is true whether it is taxed as a C-Corporation or an S-Corporation.
Separate legal entities: Corporations (C-Corps and S-Corps) are separate legal entities created by a state filing.
Filing documents: Formation documents must be filed with the state. These documents, typically called the Articles of Incorporation or Certificate of Incorporation, are the same regardless of whether you choose to be taxed as an S corporation or C corporation.
Structure: S-Corporations and C-Corporations have shareholders, directors and officers. Shareholders are the owners of the corporation, but it is the corporation that owns the business. The shareholders elect the board of directors. The board oversees and directs corporation affairs and decision-making but is not responsible for day-to-day operations. The board elects the officers to manage daily business affairs.
Corporate formalities: The state corporation laws make no distinction between C-Corporations and S-Corporations when it comes to compliance responsibilities. All corporations are required to follow the internal and external corporate formalities and obligations, such as adopting bylaws, issuing stock, holding shareholder and director meetings, maintaining a registered agent and registered office, filing annual reports, and paying annual fees.
Corporate formalities: The state corporation laws make no distinction between C-Corporations and S-Corporations when it comes to compliance responsibilities. All corporations are required to follow the internal and external corporate formalities and obligations, such as adopting bylaws, issuing stock, holding shareholder and director meetings, maintaining a registered agent and registered office, filing annual reports, and paying annual fees.

S-Corporation vs. C-Corporation: The Taxation

For small business owners evaluating S-Corporations vs. C-Corporations, the decision usually comes down to how they want the corporation to be treated for federal income tax purposes.

C-Corporations: C-Corporations are separately taxable entities. They file a corporate tax return (Form 1120) and pay taxes at the corporate level. They also face the possibility of double taxation if corporate income is distributed to business owners as dividends, which are considered personal taxable income. Corporate income tax is paid first at the corporate level and again at the individual level on dividends.
S-Corporations: S-Corporations are pass-through taxation entities. They file an informational federal return (Form 1120S), but no income tax is paid at the corporate level. The profits/losses of the business are instead “passed-through” to the business and reported on the owners’ personal tax returns. Any tax due is paid at the individual level by the owners.
Personal income taxes: With both C-Corporations and S-Corporations, personal income tax is due both on any salary drawn from the corporation and from any dividends received from the corporation.

Corporate Ownership

As we mentioned, state corporation laws make no distinction between S-Corporations and C-Corporations. But the Internal Revenue Code does place several restrictions on who can be shareholders in order for the corporation to qualify to be an S-Corporation.

Shareholder restrictions: S-Corporations are restricted to no more than 100 shareholders, and shareholders must be US citizens/residents. C-Corporations have no restrictions on ownership.

Ownership: S corporations cannot be owned by C-Corporations, other S-Corporations (with some exceptions), LLCs, partnerships or many trusts.

Stock: S-Corporations can have only one class of stock (disregarding voting rights), while C corporations can have multiple classes.

S-Corporation Advantages

Single layer of taxation:

The main advantage of the S -Corporation over the C-Corporation is that an S-Corporation does not pay a corporate-level income tax. So any distribution of income to the shareholders is only taxed at the individual level.

20% qualified business income deduction
The Tax Cuts and Jobs Act of 2017 gave eligible S-Corporation shareholders a deduction of up to 20% of net “qualified business income”.
Pass-through of losses
The losses of an S-Corporation pass-through to its shareholders, who can use the losses to offset income (subject to restrictions of the tax law).

S-Corporation Disadvantages

Limited number of shareholders

An S-Corporation cannot have more than 100 shareholders, meaning it can’t go public and limiting its ability to raise capital from new investors.

Other shareholder restrictions

Shareholders must be individuals (with a few exceptions) and U.S. citizens or residents. This also makes it harder for an S-Corporation to obtain equity financing, particularly because venture capital and private equity funds tend to be ineligible shareholders.

Preferred stock not allowed

To be eligible for S-Corporation status the corporation cannot have different classes of stock. Some investors want preferences to distributions or other privileges. An S-Corporation cannot provide that.

Transfer restrictions

Most S-Corporations will restrict their shareholders’ ability to sell or transfer their shares. That’s to make sure they don’t end up with an ineligible shareholder which will cause the IRS to terminate its S-Corporation status. This makes it harder for the shareholders of an S-Corporation to exit the corporation.

C-Corporation Advantages

Unlimited number of shareholders

There is no limit on the number of shareholders a corporation taxed under Subchapter C can have.

No restrictions on ownership

Anyone can own shares, including business entities and non-U.S. citizens.

No restrictions on classes

A C-Corporation can issue more than one class of stock, including stock with preferences to dividends and distributions.
Lower maximum tax rate
The 2017 tax reform act lowered the corporate tax rate to a flat 21% and eliminated the alternative minimum tax. Even with the personal income tax rates being slightly lowered, this rate is lower than the maximum personal tax rate (which is currently 37%)
More options for raising capital
Because Subchapter C of the tax code does not impose the same restrictions on ownership as Subchapter S, it is easier for a C-Corporation to obtain equity financing.

C-Corporation Disadvantages

Double taxation
The main disadvantage of the C-Corporation is that it pays tax on its earnings and the shareholders pay tax on dividends, meaning the corporation’s earnings are taxed twice.

When Would the Pros of an S-Corporation Outweigh the Cons?

There is no one size fits all answer to when a small business owner should choose an S corporation over a C corporation. It depends upon each individual situation. But the pros may outweigh cons when one or more of the following applies:
You don’t plan on an IPO and are not looking to sell shares to more than 100 people or any other investors that are not permitted by Subchapter S.
The corporation will be making distributions of income to shareholders.
You don’t plan on issuing preferred stock.

The shareholders’ tax liability—taking into account their personal income tax rate, deductions, and exemptions—will be lower using a pass-through entity than a separately taxed entity.

You will have losses that you will be able to deduct from your personal income taxes to offset income, resulting in a tax saving.

When Would the Pros of a C-Corporation Outweigh the Cons?

Again, there is no one right answer to that question, but here are some situations where a C-Corporation may be a good option:

Taxation under Subchapter C will result in lower taxes than taxation under Subchapter S.

Distributions will not be made to shareholders.

You plan on an IPO or seeking investors not allowed for an S corporation.

You want shares to be freely transferable.

You want to issue preferred stock.

How to Become a C-Corporation (C-Corp)

Actually, you don’t “become” or “form” a C-Corporation or an S-Corporation. You form a corporation—period. And you do that by filing a document, generally referred to as Articles of Incorporation (sometimes called a Certificate of Incorporation) with the state and pay filing fees.

Before you do, you have to choose a name (after first determining that it is available to you) and choose your corporation’s registered agent. Both the name of the corporation and the registered agent have to be included in the Articles of Incorporation.

After the incorporation process is completed, you will need to fulfill other requirements. These include adopting bylaws, holding an initial meeting of directors and shareholders, and issuing shares of stock to owners. Your corporation will be taxed under Subchapter C unless you qualify for, and elect to be taxed under Subchapter S.

How to Become an S-Corporation (S-Corp)

After you first become a corporation by filing your Articles of Incorporation with the state, you will need to file Form 2553 with the IRS if you wish your corporation to be taxed under Subchapter S. The IRS instructions—which can be a bit tough to follow—require that an election is considered effective in the current tax year only if the Form 2553 is completed and filed -

Any time before the 16th day of the 3rd month (for calendar year tax payers, this means it needs to happen by March 15th)

Any time during the preceding tax year. (However, an election made no later than 2 months and 15 days after the beginning of a tax year that is less than 2½ months long is treated as timely for that year).

Generally, an election made after the 15th day of the 3rd month but before the end of the tax year is effective for the next tax year (unless you can show failure to file on time was due to reasonable cause). Keep in mind that some states also require you to file a state-level S corporation election after incorporating your business.

What if You Want to Change How Your Corporation Is Taxed?

When you first incorporated your business, you had to choose whether your corporation would be taxed as a C-Corporation or an S-Corporation. But what if you change your mind later? This can happen, for example, because your business goals changed. Say you weren’t originally interested in an IPO but now you are. Or the tax laws changed, resulting in your corporation being better off taxed differently than before.

A lot of small businesses were reevaluating whether they should change from S corporation tax status to C-Corporation tax status, or vice versa, when The Tax Cuts and Jobs Act of 2017 was passed. This law made significant changes including—as noted earlier—reducing the corporation tax rate (which favored C-Corporations) and providing a special 20% deduction for pass-through entities (which favored S-Corporations that qualified for it). (The reduced tax rate was just one of many changes enacted.)

Tax laws are complex. And consulting with tax advisors will help you make the best decision as to how your corporation should be taxed, both at the time of incorporation and on an ongoing basis.

Choosing between C-Corporation and S-Corporation: Which Is Best for Your Small Business?

Your choice of entity type has a big impact on many aspects of your business, ranging from taxes to financing to growth strategies. Looking at the advantages and disadvantages of your options may help you come to a decision that best suits your unique business needs and goals.

Because we are not lawyers, we cannot offer legal advice or represent you in court, assist you with the selection of forms. We can only prepare legal forms, provide general published factual information written and approved by an attorney and file and serve legal forms and documents as you specifically direct. If you need legal advise or representation in court we can refer you to an attorney, within our network. Our focus is to provide local legal services to the public and attorneys in the area. We strive to simplify the difficulty of legal documents for you. We take care of the document preparation so that you know the documents are completed properly from the start.