PROFESSIONAL CORPORATION (PC)
PCs are organized by licensed professionals, such as accountants, lawyers and doctors. In California, a PC pay taxes on its net income, either at a rate of a corporation or an S Corp., with a minimum annual $800 franchise tax. PC must pay the estimated tax in four installments.
Pro:
- Owners are not liable for malpractice of other owners. However, each owner is personally liable for own malpractice.
Con:
- Many states require significant capitalization or insurance policies.
NON-PROFIT
Non-profit must be formed for a charitable, educational, religious, literary and similar public interest purposes. A non-profit can be registered on two levels: state and federal. When you hear "501(c)(3)," that refers to the section of the federal tax code and, thus, a federal level of registration. A federal level of registration is what you need in order to be eligible for federal tax exemptions and to attract donors by being able to tell them that their contributions will be tax deductible.
State level registration is a relatively quick, straightforward process, and usually only requires a simple filing of the articles of incorporation, stating the purpose of the organization, with the Secretary of State. Federal 501(c)(3) level registration requires filing a more complicated Form 1023, and takes longer to approve. In order to be eligible for federal tax exemptions, a nonprofit must first be registered at the state level. In California, most charities and non-profits must apply for and receive a letter of acknowledgement in order to receive a tax-exempt status. Small non-profits with ordinary gross receipts of less than $25,000 must electronically file an annual informational notice with the Secretary of State.
Pros:
- Tax exemptions.
- Donations to 501(c)(3) are tax-deductible.
- Eligibility for grants.
- Directors are shielded from personal liability.
Cons:
- May not be eligible to engage in certain business activities.
- Ongoing filing and reporting requirements.
B CORPORATION
"B" stands for "benefit," as in "public benefit." B Corps may harness the power of business and pursue public interest purposes at the same time. In discharging their duties, B Corp directors are not required by law to only pursue shareholder profit maximization; they may consider various socially important purposes and interests of stakeholders other than B Corp's shareholders.
Pros:
- May simultaneously pursue business and socially important purposes.
- Directors are shielded from personal liability.
Cons:
- A new and unknown to the public at large corporate form.
- Only available in a handful of states.
- Potential for abuse, if directors try to hide own business incompetence and try to justify losses with the pretense of pursuing social interests rather than profit.
PCs are organized by licensed professionals, such as accountants, lawyers and doctors. In California, a PC pay taxes on its net income, either at a rate of a corporation or an S Corp., with a minimum annual $800 franchise tax. PC must pay the estimated tax in four installments.
Pro:
- Owners are not liable for malpractice of other owners. However, each owner is personally liable for own malpractice.
Con:
- Many states require significant capitalization or insurance policies.
NON-PROFIT
Non-profit must be formed for a charitable, educational, religious, literary and similar public interest purposes. A non-profit can be registered on two levels: state and federal. When you hear "501(c)(3)," that refers to the section of the federal tax code and, thus, a federal level of registration. A federal level of registration is what you need in order to be eligible for federal tax exemptions and to attract donors by being able to tell them that their contributions will be tax deductible.
State level registration is a relatively quick, straightforward process, and usually only requires a simple filing of the articles of incorporation, stating the purpose of the organization, with the Secretary of State. Federal 501(c)(3) level registration requires filing a more complicated Form 1023, and takes longer to approve. In order to be eligible for federal tax exemptions, a nonprofit must first be registered at the state level. In California, most charities and non-profits must apply for and receive a letter of acknowledgement in order to receive a tax-exempt status. Small non-profits with ordinary gross receipts of less than $25,000 must electronically file an annual informational notice with the Secretary of State.
Pros:
- Tax exemptions.
- Donations to 501(c)(3) are tax-deductible.
- Eligibility for grants.
- Directors are shielded from personal liability.
Cons:
- May not be eligible to engage in certain business activities.
- Ongoing filing and reporting requirements.
B CORPORATION
"B" stands for "benefit," as in "public benefit." B Corps may harness the power of business and pursue public interest purposes at the same time. In discharging their duties, B Corp directors are not required by law to only pursue shareholder profit maximization; they may consider various socially important purposes and interests of stakeholders other than B Corp's shareholders.
Pros:
- May simultaneously pursue business and socially important purposes.
- Directors are shielded from personal liability.
Cons:
- A new and unknown to the public at large corporate form.
- Only available in a handful of states.
- Potential for abuse, if directors try to hide own business incompetence and try to justify losses with the pretense of pursuing social interests rather than profit.
San Diego business Lawyer Sergei Tokmakov.
Call now (858) 205-5665 with any questions regarding your case or visit his website for more free legal articles.
Call now (858) 205-5665 with any questions regarding your case or visit his website for more free legal articles.
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