Entity Formation (Corp, LLC)

Starting a business in the United States? One of the first—and most important—decisions you’ll make is choosing the right legal structure for your new entity. The three most common types are:

Corporation
Limited Liability Company (LLC)
Nonprofit Organization

Each structure has unique advantages, legal implications, tax treatments, and compliance requirements.

In this guide, we’ll walk you through the details of each entity type, how to form one, and which might be right for your goals.

💡 Why Entity Formation Matters

Forming a legal entity gives your business credibility, protection, and structure. Here’s why it’s important:

✅ Limits personal liability
✅ Helps raise capital or accept donations
✅ Creates a legal identity for contracts
✅ Improves business credibility
✅ Determines how you’re taxed

Choosing the wrong entity can lead to higher taxes, legal exposure, or even business failure.

🧱 Option 1: Forming a Corporation

What Is a Corporation?

A corporation is a legal entity that exists independently of its owners (shareholders). It can:

Own property
Enter contracts
Sue and be sued
Raise capital by issuing stock

There are two main types:

C Corporation (C-Corp)
S Corporation (S-Corp)

Key Features

Feature	C-Corp	S-Corp
Taxation	Double taxation (corp + owners)	Pass-through (no corp tax)
Shareholders	Unlimited	Max 100, U.S. citizens only
Stock Types	Multiple classes allowed	One class only
Ideal For	Startups, VCs, global scale	Small U.S.-based businesses

Pros of Corporations

✅ Limited liability
✅ Easier to raise capital
✅ Perpetual existence
✅ Credibility with banks/investors

Cons of Corporations

❌ More paperwork
❌ Higher compliance costs
❌ Double taxation for C-Corps

How to Form a Corporation

Choose a state of incorporation (often Delaware for startups)
Select a name
File Articles of Incorporation
Appoint directors and officers
Issue stock to shareholders
Obtain EIN (Tax ID) from IRS
Comply with ongoing state filings & taxes

💼 Forming a corporation is ideal for businesses planning to scale nationally or attract outside investors.

🏢 Option 2: Forming an LLC (Limited Liability Company)

What Is an LLC?

An LLC is a hybrid entity that offers the liability protection of a corporation with the tax flexibility of a sole proprietorship or partnership.

LLCs can be:

Single-member or multi-member
Member-managed or manager-managed

Key Features

Feature	LLC
Legal Protection	Yes (limited liability)
Taxation	Pass-through by default; electable as S or C Corp
Ownership Flexibility	Very flexible (no limit on members)
Formalities	Fewer than corporations

Pros of LLCs

✅ Simple formation
✅ Fewer regulations
✅ Flexible taxation
✅ Protects personal assets

Cons of LLCs

❌ May be harder to attract investors
❌ More complex taxes in multi-member LLCs
❌ Self-employment tax exposure (unless taxed as S-Corp)

How to Form an LLC

Choose a state
Pick a unique name
Appoint a registered agent
File Articles of Organization
Create an Operating Agreement
Obtain EIN from IRS
Register for state/local taxes if required

🧾 LLCs are great for small to medium-sized businesses looking for flexibility and simplicity.

❤️ Option 3: Forming a Nonprofit Organization

What Is a Nonprofit?

A nonprofit is an entity formed for a public benefit, charitable cause, religious mission, or educational purpose. Nonprofits can apply for tax-exempt status under IRS Code 501(c)(3) (or other sections).

Key Features

Feature	Nonprofit
Purpose	Charitable, educational, religious, etc.
Tax Exemption	Yes, if IRS 501(c)(3) approved
Ownership	No owners or shareholders
Profits	Must be reinvested into mission

Pros of Nonprofits

✅ Tax-exempt status
✅ Eligible for grants and donations
✅ Limited liability
✅ Public trust & support

Cons of Nonprofits

❌ Strict IRS compliance
❌ No profit distribution
❌ Lengthy formation process
❌ Board of Directors required

How to Form a Nonprofit

Choose a state for incorporation
Pick a charitable name
Appoint a board of directors
File Nonprofit Articles of Incorporation
Draft bylaws
Apply for IRS 501(c)(3) status (Form 1023 or 1023-EZ)
Register with your state’s charity bureau

💡 Nonprofits are perfect for organizations whose primary goal is impact—not profit.

🌐 Which Structure Should You Choose?

Here’s a quick comparison to help guide your decision:

Feature	Corporation	LLC	Nonprofit
Ownership	Shareholders	Members	None (public trust)
Taxation	Corp or pass-through	Pass-through or Corp	Tax-exempt (if 501c3)
Legal Protection	✅ Yes	✅ Yes	✅ Yes
Profit Distribution	Yes	Yes	No
Best For	Startups, investors	Small/medium businesses	Charities, causes

📦 What You’ll Need for Any Entity Formation

No matter which entity type you choose, you’ll generally need to:

✅ Choose a business name
✅ File with the Secretary of State
✅ Get an EIN from the IRS
✅ Appoint a registered agent
✅ Draft internal governance documents (bylaws or operating agreement)
✅ Maintain good standing with annual reports & taxes

🧠 Pro Tips from Complycove

Pick the right state: Delaware, Wyoming, and Nevada are popular for corporations and LLCs—but don’t overlook where you’ll actually do business.
Think long-term: Your choice of entity affects taxes, funding, and operations.
Don’t DIY everything: Mistakes in formation can be costly and hard to fix.

🛡️ Let Complycove Handle It for You

At Complycove, we make entity formation fast, easy, and compliant—so you can focus on building your vision.

Our Formation Services Include:

📄 Filing Articles of Incorporation or Organization
🕵️‍♂️ Registered Agent Service
📘 Operating Agreements or Bylaws
🧾 EIN Acquisition
🧠 Compliance Guidance
💼 IRS 501(c)(3) Application (for nonprofits)

📞 Ready to Get Started?

Let’s make your business official. Whether you’re forming a corporation, LLC, or nonprofit—we’ll help you do it right.

👉 Contact Us at info@complycove.com
🌐 Visit www.complycove.com

“Forming your entity is the first step. Complying with it is the journey. Let Complycove be your guide.”