Business incorporation allows for a company or business to be given rights and protection under the law as if such a company were an actual person. Company incorporation helps an established business be protected against several factors, though one of the major ones is liability. Business incorporation is usually something that most companies will seek, particularly those that are considered to be small businesses.
In the United States, there are three types of incorporated businesses. At the time of company incorporation, a business may declare what kind of incorporated business it is to become, as long as it is eligible to do so. Furthermore, when a business becomes incorporated in a particular country, it is subject to the laws of that nation.
In the United States, business incorporation is regulated at the state level, and thus, is subject to state laws as well. Taking such factors into consideration, the most common types of business incorporation are Close corporations, C corporations, and S corporations.
Close corporations issue stock, but will usually do so in limited amounts. The amount of shareholders is usually about thirty, allowing for most of the shareholders to be directly involved in the decisions of the company.
C corporations are the most common type of incorporated business in the United States. Unlimited amounts of stock can be traded and will have smaller boards of directors making the decisions. Taxes are paid at the corporate level and at the personal level, while shareholders must pay taxes on dividends.
S corporations are almost the same as C corporations with the exception that they will only pay taxes on dividends and the corporation itself does not pay any taxes.