S Corporation
An S-Corporation begins its existence just like a general or C-Corporation. It is a legal entity established via the state of incorporation which has rights and duties independent of the rights and duties of persons who own it. It can do such things as enter into contracts and sue and be sued, and is legally authorized to act in its own name through duly appointed agents. A corporation is owned by its shareholders who appoint a board of directors who are responsible for overseeing the management of the company. The board of directors generally employs officers such as the president, chief executive officer, treasurer, and secretary who serve at the pleasure of the board and are responsible for the day-to-day operations of the corporation Usually created under the authority of state law. Like the LLC, a corporation provides for limited liability for its shareholders, generally meaning shareholders can only be held liable up to the maximum amount of their investment in the shares of the company.
Pass-Through Tax Treatment
An S-Corporation differs from a general corporation in that the company elects different tax treatment from the Internal Revenue Service. S-Corporations have pass-through tax treatment, meaning that corporate profits are not taxed directly to the corporation, Instead, revenue and profits are taxed directly to the shareholders. Generally a corporation pays taxes on its profits then the shareholders pay taxes on any dividends. This is generally considered double taxation and the S-Corporation eliminates this two-tier tax. Not all corporations qualify for S-Corporation status. Some of the limitations include the citizenship status of the shareholders and the overall number of shareholders in the corporation.
California Governance
In California, general provisions governing most corporations are found in the California Corporations Code commencing with sections 100 (domestic stock corporations), 5110 (domestic nonprofit public benefit corporations), 7110 (domestic nonprofit mutual benefit corporations), 9110 (domestic nonprofit religious corporations) and 2100 (foreign (out of state or country) corporations).
Foreign Corporation
A foreign (out of state or country) corporation transacting intrastate business in the State of California must qualify to do so with the Secretary of State's office. "Transacting intrastate business" is defined as entering into repeated and successive transactions of a corporation's business in this state, other than interstate or foreign commerce. See California Corporations Code Section 191. If you are unable to make a determination based upon the contents of Corporations Code Section 191, you will need to consult private legal counsel. The Secretary of State's office cannot provide legal advice concerning a corporation's need to qualify to transact intrastate business in California.
How We Serve Our Clients
With our experience working with entrepeneurs to establish new businesses we will guide you through the process of forming a new company, assisting you in choosing the appropriate legal structure and explaining the advantages of each for your particular enterprise. After the business is established, our attorneys will be at your disposal to answer general legal questions when they arise. Our clients also call on us to assist them during transitional periods, raising capital, locating venture partners, merging, selling, and closing a business.
