Business Lawyer Blog

There are primarily two types of business formations in the United States. These include a limited liability company or LLC and a corporation. Corporations are further classified as “S” Corporation and a “C” corporation. Both these corporations are on different tax levels as per the norms of the US Internal Revenue Service or the IRS and on the fact that they fulfill certain criteria that are specified in the tax code.

The basic attributes of both the “C” and “S” corporations are almost similar. Both of these offer limited liability. The owners of both these types of corporations are also referred to as shareholders and are held financially accountable for the liabilities of the company for the respective amounts that they have invested in the corporation as capital.

“S” Corporations: These are small companies that are privately owned. The profits generated by the company are liable to be taxed once. As per the existing tax codes, the shareholders of such a corporation should not exceed 75. All the shareholders should have their respective SSN or Social Security Number which in fact can only be obtained if the shareholder is a US citizen, a temporary resident or a permanent resident. If a corporation fails to satisfy the requirements that are specified for an “S” Corporation, it would be eventually be declared as a “C” corporation by the IRS.

“C” Corporation: These are large companies with several shareholders. The profits generated by this corporation are taxed twice and the corporation needs to pay income tax twice.

Then there are a number of limited liability companies which also share their core attributes with that of the corporations especially when it comes to the owner’s liability for their share of investment in the capital and prove to be advantageous especially for the foreign investors.

These are the basic guidelines that are followed for business formations in the country and are therefore applicable for each of the states. Arizona business formation is also governed by the above mentioned factors. You can browse a legal directory to check the legalities involved with the process.