What sets a corporation apart from all other types of businesses is that a corporation is an independent legal and tax entity, separate from the people who own, control and manage it.

Because of this separate status, the owners of a corporation don't use their personal tax returns to pay tax on corporate profits-the corporation itself pays these taxes.

Owners pay personal income tax only on money they draw from the corporation in the form of salaries, bonuses, and the like.

An S-corporation is a regular corporation that has elected "S-corporation" tax status. Forming an S-corporation lets you enjoy the limited liability of a corporate shareholder but pay income taxes as if you were a sole proprietor or a partner.

In an S-corporation, all business profits "pass through" to the owners, who report them on their personal tax returns. The S-corporation itself does not pay any income tax.

Therefore, an S-corporation elects not to be taxed as a corporation.

After the corporation has been formed, it may elect "S-Corporation Status" by submitting IRS form 2553 to the Internal Revenue Service (in some cases a state filing is required as well).

State laws distinguish between for-profit (stock) corporations and non-profit (non-stock) corporations.

A non-profit corporation often involves an organization whose primary objective is to support some issue or matter of private interest or public concern for non-commercial purposes.

Examples of non-profit types might relate to the arts, charities, education, politics, religion, research, sports or some other endeavor.

Under the Federal Tax Code Section 501(c), a tax-exempt corporation cannot pay dividends and, upon dissolution, must distribute its remaining assets to another nonprofit group.

If your corporation will be engaging in what your state might call "professional services," the Articles of Incorporation must bear special language and the corporation must be formed pursuant to certain statutory provisions.

"Professional Services" according to most states usually consists of the following activities:

 Medical Services
 Legal Services and Representation
 Accounting and Financial Services
 Architectural Services
 Other services may be included in this list depending on your selected state of incorporation

It is important to note that most states vary in their requirements regarding licensing of professional activities, therefore, we encourage you to seek the advice of an attorney if you fall within the "Professional Services" statute of your state.