Corporation and Partnership Forms Key Terms

Get ready to incorporate your business by learning corporation and partnership forms key terms

Organizing your business into a corporation or partnership is usually pretty easy--all it takes are a few forms, a small fee and the right operating licenses to get up and running. Deciding which business entity to use, however, can take a bit more time, especially if your business is growing fast or between sizes. In any event, knowing key terms will help you choose the right structure for your business and enable you to organize it quickly.

 

Articles of incorporation

If you want to form a corporation or a limited liability company (LLC), you'll need to fill out articles of incorporation and submit them to the appropriate state agency.
Try: FindLaw has links to articles of incorporation for each state.

Agent for service of process

Also known as the "registered agent," the agent for service of process functions as the contact point between a corporation and its shareholders. If you choose to incorporate, you usually need to choose this agent in the articles of incorporation.
Try: Nolo's guide to forming a corporation talks about registered agents and covers each step of the formation process.

S corporation

A somewhat outdated structure, the S corporation combines the benefits of a traditional corporation (limited liability) with those of a partnership (pass-through taxation). LLCs have largely replaced S corporations.
Try: Check out the side-by-side comparison of business structures at LegalZoom.com to learn more.

Pass-through taxation

If you're creating a corporation or LLC, you will need to distribute all of your business's profits and losses to the shareholders or partners as income. Known as pass-through taxation, this prevents the IRS from requiring the business to pay taxes twice.
Try: The Company Corporation provides an overview of the benefits to forming a corporation or other structure with pass-through taxation.

Operating agreement

When you incorporate your business, you and your partners will need to draw up an operating agreement that outlines your basic rights and responsibilities. A fair, efficient agreement is vital to the success of the venture.
Try: Get tips for writing a solid operating agreement from the Mesriani Law Group.

Self-employment tax

Before you file corporation forms, remember that the owners of LLCs are subject to self-employment tax, which is about 15% of income. S and C corporations, however, are not, although they are often more difficult to organize and run.
Try: Check out the guide to business structures at the Microsoft Small Business Center before making your decision.

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