Kyle's Blog
ICC Explained
The corporation was conceived to solve the typical problems of the partnership. Incorporating allows a group of entrepreneurs to act as one, much in the way that a partnership does, but with one important advantage. Since the corporation is a separate legal entity capable of being sued, it can protect its owners by absorbing the liability if something goes wrong.In recent years, the corporation has developed as a tax reduction/planning tool. When a corporation is created, it is a “C” corporation unless you designate it to be an “S” corporation.
A corporation is created and operated with the permission of the state where it is incorporated by filing articles of incorporation in the state. The owner of the corporation is known as the shareholder. Since a corporation is a separate legal entity, the corporation actually owns and operates the business on behalf of the shareholder, under the shareholder’s total control. This separation provides a legal distinction between the owner and the business and provides three important benefits:
It allows you, the owner, to hire yourself as an employee (typically as president) and then participate in company-funded employee plans like medical insurance and retirement plans.
Since you and your company are now two separate legal entities, lawsuits can be brought against your company instead of you personally.
When debt is incurred in the company name, a separate legal entity, you are not personally liable and your assets cannot be taken to settle company obligations.
Domestic corporations (corporations organized in Kentucky) and foreign corporations (corporations organized in a state other than Kentucky) are subject to a Kentucky income tax. In addition, qualified local governments in Kentucky are authorized to levy a local income tax, so be sure to check with your local government.
There are C Corporations and S Corporations