Businesses incorporate primarily for protection: protection of the owners of the company from the liabilities of the business. Both corporations and limited liability companies legally separate the owners/investors of a company from their company's liabilities. Further, incorporation of either a corporation or an LLC may provide tax benefits, prestige and/or name protection, as well as possibly making it easier to set up health insurance, retirement plans and other benefits to owners and employees.

What are the main types of companies/entities?

Although there are several types of companies, the most commonly-used types are corporations and limited liability companies.

In the US tax code, a corporation is a C corporation by default. Because it is separate from its shareholders, it pays its own taxes based on its own income. No one is entitled to take money from the corporation unless it is a payment for services rendered, for salary or bonus, or as a dividend. Income remaining after deductions for expenses and depreciation are taxed by the federal government and perhaps also by state governments. What's left after this is available to build up capital in the corporation or to give to the shareholders as dividends.

Businesses incorporate primarily for protection: protection of the owners of the company from the liabilities of the business. Both corporations and limited liability companies legally separate the owners/investors of a company from their company's liabilities. Further, incorporation of either a corporation or an LLC may provide tax benefits, prestige and/or name protection, as well as possibly making it easier to set up health insurance, retirement plans and other benefits to owners and employees.

What are the main types of companies/entities?

Although there are several types of companies, the most commonly-used types are corporations and limited liability companies.

Nearly all states require a company to have an agent within the state to accept service of process and to whom the state will send annual reports, tax notices and other compliance matters. If the company doesn't have its own address within the state, it can use a professional registered agent to fulfill this requirement. Failure to maintain an agent usually means the company will lose its legal right to do business.