You can form a Corporation or Limited Liability Company (LLC).
The two main benefits of incorporating are:
1. A Corporation is a separate entity from you.
- Your legal liability is usually limited to the assets of the corporation instead of you personally.
- The corporation has its' own federal I.D. number.
2. Income received by the corporation may be considered investment income. If setup correctly, it is not subject to the 15% self-employed tax.
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The three main types of incorporation are:
1. S Corporation
- This corporation pays no tax.
- This type of corporation is the most popular.
- The profit or loss of the corporation is passed through to the shareholders.
2. C Corporation/Corporation
- This corporation is taxed separately from the shareholders.
- Tax rate varies from 15% and up.
- Income is distributed to shareholders in the form of dividends.
3. Non-Profit Corporation
- This corporation is for the purpose of conducting non-profit business.
- Some examples of a Non-Profit Corporation are churches, hospitals, schools, colleges and universities, and active fundraising programs.
* Contact us for more information and to see which one you qualify for.
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