A corporation is a type of way to organize your business entity. Depending on your business situation it could be beneficial to create one. In this article, we will go over the benefits and disadvantages of corporations and how to create one in the State of Arizona.
There can be many benefits to setting up a corporation. Some benefits may include:
Limiting Your Liability: Since a corporation is a separate entity from the owner, it helps to limit liability. It keeps you as an owner/shareholder from being personally responsible for the business’ debts and liabilities. This means creditors cannot cause issues with your personal home or vehicle.
Unrestricted Life: The lifespan of a corporation is not dependent on its owner(s). So, if an owner dies the business can continue on as before without any issues and delays.
Fundraising: Some find that it is easier to raise funds with a corporation. This is the case because a corporation has the ability to issue shares in the company to as a fundraising avenue.
Drawbacks to Corporations
As with anything in life, there are some potential drawbacks to creating a corporation. Some of these disadvantages include, but are not limited to:
Double Taxation: One of the biggest drawbacks of setting up a corporation is double taxation. This happens because taxes are paid on the corporate level and then again on the personal level when the owners/shareholders report dividends on their tax returns.
Formalities: Running a corporation involves a lot of formalities. You are required to hold and document an annual shareholders meeting. Corporations must also adopt and maintain bylaws and issue shares of stocks to the owners.
Creating a Corporation in Arizona
Each state has a different process for creating business entities. In this blog, we are going to go over the process for creating an Arizona Corporation. Here is an outline of the steps for creating a corporation in Arizona:
- You will first need to choose a name for your corporation. Your name must include the word associate, company, corporation, limited, incorporated, or an abbreviation of one of them. Once you choose your name, you need to check with the Arizona Corporation Commission that the name you want is available.
- Once you have your name you will need to prepare and file Articles of Incorporation with the Corporation Commission.
- You will then need to create Bylaws. Bylaws set out the rules and procedures of your corporation, the responsibilities of your corporate directors and officers, and set out how many people will sit on your board of directors.
- After the first three steps are done you will need to hold your first organizational meeting. During this meeting you need to appoint directors, appoint officers, adopt the corporate bylaws, authorize the issue of stock, and set your accounting year.
- You also need to issue stock certificates to the initial owners.
Setting Up Your Corporation
If you feel like setting up a corporation is right for you, the next step is to set up your corporation. At Wealth Guardian Group we can help you with the process by creating all initial documentation for you and dealing the Arizona Corporation Commission Filing. Setting up a business can be overwhelming but we can help make it easier!
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