Corporations are a key part of the commercial world. They assume their own life under Georgia law and their own duties and rights. They can make money, incur debts, pay taxes, and be plaintiffs or defendants in lawsuits. The most crucial decision you will initially make about your business is the structure under which you will operate.
When you charter a corporation, the default designation is a C Corporation. At Sparks Law, a knowledgeable attorney can explain the implications of this structure and help determine whether it benefits you and your business. Speak with an Atlanta C Corporations lawyer for more information.
To charter a C Corporation in Georgia, owners file Articles of Incorporation with the Secretary of State, accompanied by a filing fee. Owners also provide information such as the company’s:
The company also names a registered agent who accepts service of process. If the company is a foreign corporation (i.e., chartered in Georgia but doing business in another state), the agent can accept important documents for it.
Although shareholders own corporations through their stock holdings, they are not named in the Articles of Incorporation. Until a company turns the stock register over to a transfer company to maintain or goes public, it should keep detailed records about who owns how many shares. A seasoned attorney at our Atlanta office could assist in setting up records books for a C Corporation.
The primary reason C Corporations elect to becomes S Corporations is the pass-through federal tax status, in which the company does not pay income tax like a C Corporation. The shareholders pay it after profits are passed to them (and losses too, for deductions). The company can also distribute profits as taxable dividends to shareholders.
C Corporations are the traditional vehicle for businesses that wish to raise capital through debt and equity and may want to go public in the future. They issue a set amount of stock into the marketplace and may have as many shareholders worldwide as are interested in owning it.
S Corporations are permitted only 75 shareholders who must be US citizens. Shareholders are subject to pay Georgia income tax on pass-through profits, even if they are not Georgia residents. Other differences include:
Because the two types of corporations are taxed and allocate profits differently, owners should consult with an Atlanta corporate attorney to determine the most profitable business strategy.
Business owners who charter a C Corporation can convert to an S Corporation by filing Form 2553 with the IRS. Shareholders must also sign Form 600 S-CA, agreeing to pay Georgia income tax on the passed-through profits. The S Corporation files Form 600S with the state.
If an S Corporation wishes to convert back to a C Corporation, it must apply to the IRS but must retain the December 31 fiscal year-end. A local attorney at Sparks Law can help with either of these processes and advise on the benefits of converting between a C and S Corporation.
You want the most advantageous business structure to get your company off on the right foot. Our Atlanta C Corporation lawyers can review your goals and determine which structure is best for you. We are here to answer all of your business questions and help you achieve success, so call today to schedule your initial consultation.