Definition of a Corporation
Buzzle.com defines A corporation as a legal entity which is independent of the legal entities of its owners, shareholders or the management personnel running it.
Advantages of a Corporation
According to form-a-corp.com, the most important advantage of incorporation is that it gives its stockholders limited liability. Since the corporation is a separate legal entity, its stockholders are protected from the debts and liabilities of the corporation.
Disadvantages of a Corporation
According to form-a-corp.com, the primary disadvantage to incorporation is the possibility of double taxation. The profits of a corporation are taxed first as income to the corporation, then second as income to the shareholder. However, all reasonable business expenses such as salaries and other operating expenses are deductions against corporate income which can minimize double taxation. Double taxation can be eliminated by making an S Corporation election. S Corporations only pay taxes one time at the tax rate of the shareholder(s). S Corporations can deduct the same expenses as a C corporation.
According to ehow.com, to form a Tennessee corporation, you must file paperwork with the Tennessee department of state. Once the agency approves the documents, the business will be treated as a distinct legal entity with a life separate from the company owners. Forming a corporation in Tennessee protects the personal assets of the company's owners from the debts and obligations that may occur while running the business.
According to northwestregisterdagent.com using resources from tn.gov, the forms and process you will use to dissolve/terminate your Tennessee Corporation are different depending on the circumstances. A Tennessee corporation can be voluntarily dissolved before or after it has started to conduct business. And it can be involuntarily dissolved by the Department of State. You would use a different form for each situation. The DBS forms are in your online account when you sign up for registered agent service and are available on the DBS website. You are not required to use the Division of Business Services’ dissolution and termination forms; you may choose to draft your own articles of dissolution or termination.
By Incorporators:
If your corporation has not commenced business or not issued shares, all you have to do is file SS-4423 Articles of Dissolution and Termination by Incorporators or Directors.
By Shareholders:
Tennessee Department of State, Division of Business Services requires corporations to first dissolve, then terminate. When the articles of dissolution have been filed, the corporation still exists but can only wind up its business. Once business is concluded, the corporation has to file articles of termination. If business has been concluded, you could file the articles of dissolution and termination with DBS at the same time.
Division of Business Services
312 Rosa L. Parks Avenue
Snodgrass Tower, 6th Floor
Nashville, TN 37243
615-741-2286
According to form-a-corp.com, below is a breakdown of the costs required to create a corporation.
Links to Online Forms Required for these Processes
Definition of a LLC (Limited Liability Company)
According to legalzoom.com, an LLC is a business entity created under state law that can shield you from personal liability. LLCs are becoming the most popular way to start a business due to their ease and flexibility.
Advantages of a LLC
According to limitedliabilitycompanycenter.com, a limited liability company (LLC) has many advantages as a form of business entity:
According to limitedliabilitycompanycenter.com, while a limited liability company (LLC) offers many advantages over other forms of business entity, there are also some disadvantages. Some of the drawbacks to selecting an LLC over another entity are:
According to ehow.com, an LLC, or limited liability company limits the liability of the owners. This type of business makes most sense for the small time business owner who has invested hard work into the business but doesn't want personal assets to be liable should the business incur bad debts or fail. A limited liability company can comprise one person or several members and can include nonprofit organizations.
According to northwestregisterdagent.com using resources from tn.gov, the forms and process to dissolve/terminate your Tennessee LLC are different depending on the situation. The LLC dissolution and termination forms are in your online account when you sign up for registered agent service and are available on the DBS website. You are not required to use the Division of Business Services’ dissolution and termination forms; you may choose to draft your own articles of dissolution or termination.
Division of Business Services
312 Rosa L. Parks Avenue
Snodgrass Tower, 6th Floor
Nashville, TN 37243
615-741-2286
According to form-a-corp.com, below is a breakdown of the costs required to create a LLC.
Links to Online Forms Required for these Processes
According to the state of TN, you must fill out the forms listed under the "Forms for Limited Liability Companies" to create a LLC.
Buzzle.com defines A corporation as a legal entity which is independent of the legal entities of its owners, shareholders or the management personnel running it.
Advantages of a Corporation
According to form-a-corp.com, the most important advantage of incorporation is that it gives its stockholders limited liability. Since the corporation is a separate legal entity, its stockholders are protected from the debts and liabilities of the corporation.
Other advantages:
- A corporation has unlimited life. If an owner dies or sells his interest the corporation will continue to exist and do business.
- Ability to easily establish insurance and retirement plans.
- Ownership of corporation is easily sold or transferred through sale or transfer of stock.
- Capital can be raised through sale of stock.
- A corporation has centralized management which may remain in place after sale of business.
Disadvantages of a Corporation
According to form-a-corp.com, the primary disadvantage to incorporation is the possibility of double taxation. The profits of a corporation are taxed first as income to the corporation, then second as income to the shareholder. However, all reasonable business expenses such as salaries and other operating expenses are deductions against corporate income which can minimize double taxation. Double taxation can be eliminated by making an S Corporation election. S Corporations only pay taxes one time at the tax rate of the shareholder(s). S Corporations can deduct the same expenses as a C corporation.
- Complexity and expense of forming a corporation.
- Legal formalities involved with a corporation.
According to ehow.com, to form a Tennessee corporation, you must file paperwork with the Tennessee department of state. Once the agency approves the documents, the business will be treated as a distinct legal entity with a life separate from the company owners. Forming a corporation in Tennessee protects the personal assets of the company's owners from the debts and obligations that may occur while running the business.
- Verify the availability of your business name. It must be distinguishable from other business entities registered with the Tennessee department of state. Confirm availability via the Tennessee department of state website. Add a corporate identifier to the company's legal name such as "corporation," "company," "incorporated" or the appropriate abbreviation.
- Assign directors. The director of a Tennessee corporation is not required to live in the state or be of a certain age. A company shareholder may act as a director of the business. At least one person must be named to the Tennessee corporation's board of directors.
- Prepare the Tennessee charter. Tennessee corporations may complete the company's charter online or print a fill-in-the-blank version using the Tennessee department of state website. Call the Tennessee department of state at 615-741-2286 to have a fill-in-the-blank charter sent via mail. Provide information about the company such as the name and address of the person who will accept the Tennessee corporation's legal documents. List the name and address of each incorporator responsible for filing the company's charter with the Tennessee department of state. Indicate the number of shares the company will have the authority to issue. State either the date when the corporation will dissolve or that the company will have an unlimited existence.
- Submit the charter to the Tennessee department of state. You can do it through the Tennessee department of state website, via mail or in person at the Tennessee department of state's office at 312 Rosa L. Parks Ave., Snodgrass Tower, 6th Floor; Nashville, TN 37243. As of 2010, it cost a corporation $100 to file its charter. Do so with the register of deeds in the Tennessee county where the corporation is located.
- Compose bylaws to establish rules and procedures for running the business. The state of Tennessee does not impose specific requirements on the contents of a Tennessee corporation's bylaws. Include provisions such as the time and place of company meetings, procedures for electing new directors and indicate the responsibilities of company officers. You should keep the bylaws at the Tennessee corporation's principal office.
- Hold an organizational meeting. Adopt the company's bylaws, which officially make it the Tennessee corporation's governing document. Issue stock certificates to initial shareholders. Directors must set the compensation for each share of company stock. The initial shareholders may provide services, cash and property in exchange for ownership interest in the business.
According to northwestregisterdagent.com using resources from tn.gov, the forms and process you will use to dissolve/terminate your Tennessee Corporation are different depending on the circumstances. A Tennessee corporation can be voluntarily dissolved before or after it has started to conduct business. And it can be involuntarily dissolved by the Department of State. You would use a different form for each situation. The DBS forms are in your online account when you sign up for registered agent service and are available on the DBS website. You are not required to use the Division of Business Services’ dissolution and termination forms; you may choose to draft your own articles of dissolution or termination.
By Incorporators:
If your corporation has not commenced business or not issued shares, all you have to do is file SS-4423 Articles of Dissolution and Termination by Incorporators or Directors.
By Shareholders:
Tennessee Department of State, Division of Business Services requires corporations to first dissolve, then terminate. When the articles of dissolution have been filed, the corporation still exists but can only wind up its business. Once business is concluded, the corporation has to file articles of termination. If business has been concluded, you could file the articles of dissolution and termination with DBS at the same time.
- You will file SS-4255, Written Consent to Dissolution and SS-4410, Articles of Dissolution.
- Then you file SS-4256, Written Consent to Termination and SS-4412, Articles of Termination of Corporate Existence
- After administrative dissolution:
- If your Tennessee corporation has been administratively terminated and you do not want to reinstate, then you file SS-4414, Articles of Termination following Administrative Dissolution or Revocation
- You will submit the original dissolution and termination documents by mail or in person to the Department of State, Division of Business Services. DBS accepts checks, cashier’s checks, money orders etc., payable to the “Tennessee Secretary of State.
Division of Business Services
312 Rosa L. Parks Avenue
Snodgrass Tower, 6th Floor
Nashville, TN 37243
615-741-2286
- There is no fee for filing written consent to dissolution or termination
- Articles of Dissolution: $20.00
- Articles of Termination: $20.00
- Articles of Termination following Administrative Dissolution: $100.00
- You do not have to get the tax clearance from the Department of Revenue before you file the articles of dissolution or termination for your Tennessee corporation. The Division of Business Services will request a tax clearance for your corporation when you file the articles. If you have any outstanding tax debt, your articles will be rejected.
- If you mail your dissolution documents, they are processed in 3-5 business days.
- If you deliver documents in person DBS will process them while you wait.
- Tennessee DBS does not offer expedited processing.
- Getting tax clearance from the Department of Revenue can add time to processing if you have unpaid taxes.
- As soon as you file your Articles of Termination with DBS, your corporate name is up for grabs by other businesses.
- Tennessee requires that each corporation deliver an annual report to the Department of State, Division of Business Services. A $20.00 filing fee must be submitted with the corporations annual report. If you don’t file both, the DBS will send you a delinquency notice. If you do not file within sixty days of that notice, your corporation will be administratively dissolved.
According to form-a-corp.com, below is a breakdown of the costs required to create a corporation.
- Complete Package ($299.99)
- Form-A-Corp Fees
- Expedited State Filing Service
- Corporation Kit with Seal
- Prepare IRS Form SS-4 (Employer Identification Form)
- Forms on Disk
- Express Next-Day Service
- Tennessee state filing fees ($100.00)
- Total Cost ($399.99)
- Additional fees may be needed if you wish to acquire a Tax ID (EIN) or need to prepare S-Corporation election Form 2553.
Links to Online Forms Required for these Processes
According to the state of TN, you must fill out the forms listed under the appropriate type of corporation you wish to form in order to create that corporation.
According to legalzoom.com, an LLC is a business entity created under state law that can shield you from personal liability. LLCs are becoming the most popular way to start a business due to their ease and flexibility.
Advantages of a LLC
According to limitedliabilitycompanycenter.com, a limited liability company (LLC) has many advantages as a form of business entity:
- Pass-through taxation - under the default tax classification, profits taxed at the member level, not at the LLC level (i.e., no double taxation).
- Limited liability - the owners of the LLC, called "members," are protected from liability for acts and debts of the LLC.
- With "check-the-box" taxation, an LLC can elect to be taxed as a sole proprietor, partnership, S-corp or corporation, providing much flexibility.
- Can be set up with just one natural person involved or, in some states, one owner which may be an entity itself.
- No requirement of an annual general meeting for shareholders (in some states, such as Tennessee and Minnesota, this statement is not correct).
- No loss of power to a board of directors (although an operating agreement may provide for centralization of management power in a board or similar body).
- LLCs are enduring legal business entities, with lives that extend beyond the illness or even death of their owners, thus avoiding problematic business termination or sole proprietor death.
- Much less administrative paperwork and record-keeping.
- Membership interests of LLCs can be assigned, and the economic benefits of those interests can be separated and assigned, providing the assignee with the economic benefits of distributions of profits/losses (like a partnership), without transferring the title to the membership interest (e.g., see Virginia and Delaware LLC Acts).
According to limitedliabilitycompanycenter.com, while a limited liability company (LLC) offers many advantages over other forms of business entity, there are also some disadvantages. Some of the drawbacks to selecting an LLC over another entity are:
- Earnings of most members of an LLC are generally subject to self-employment tax. By contrast, earnings of an S corporation, after paying a reasonable salary to the shareholders working in the business, can be passed through as distributions of profits and are not subject to self-employment taxes.
- Since an LLC is considered a partnership for Federal income tax purposes, if 50% or more of the capital and profit interests are sold or exchanged within a 12-month period, the LLC will terminate for federal tax purposes.
- If more than 35% of losses can be allocated to non-managers, the limited liability company may lose its ability to use the cash method of accounting.
- A limited liability company which is treated as a partnership cannot take advantage of incentive stock options, engage in tax-free reorganizations, or issue Section 1244 stock.
- There is a lack of uniformity among limited liability company statutes. Businesses that operate in more than one state may not receive consistent treatment.
- In order to be treated as a partnership, an LLC must have at least two members. An S corporation can have one shareholder. Although all states allow single member LLCs, the business is not permitted to elect partnership classification for federal tax purposes. The business files Schedule C as a sole proprietor unless it elects to file as a corporation.
- Some states do not tax partnerships but do tax limited liability companies.
- Minority discounts for estate planning purposes may be lower in a limited liability company than a corporation. Since LLCs are easier to dissolve, there is greater access to the business assets. Some experts believe that limited liability company discounts may only be 15% compared to 25% to 40% for a closely-held corporation.
- Conversion of an existing business to limited liability company status could result in tax recognition on appreciated assets.
According to ehow.com, an LLC, or limited liability company limits the liability of the owners. This type of business makes most sense for the small time business owner who has invested hard work into the business but doesn't want personal assets to be liable should the business incur bad debts or fail. A limited liability company can comprise one person or several members and can include nonprofit organizations.
- Choose a name for the company and see if it is available in the state of Tennessee.
- Visit the State of Tennessee's Department of State Corporate Filing Office online or in person to obtain Form 4270.
- Fill out Form 4270. It asks the name of the company, the address and, if it has more than one member, how the company will be managed. Be prepared to fill out this information as well as decide if it should be effective immediately or at a later date. Tennessee will allow you to file up to three months in advance.
- Submit the form and filing fee to the State of Tennessee Division of Business Services. As of 2010, the minimum filing fee is $300. Each additional member after six members will cost $50 up to a maximum of $3,000.
According to northwestregisterdagent.com using resources from tn.gov, the forms and process to dissolve/terminate your Tennessee LLC are different depending on the situation. The LLC dissolution and termination forms are in your online account when you sign up for registered agent service and are available on the DBS website. You are not required to use the Division of Business Services’ dissolution and termination forms; you may choose to draft your own articles of dissolution or termination.
- If your LLC has not accepted contributions, form SS-4244, Articles of Termination by the Organizers is to terminate a Tennessee LLC that has not yet accepted contributions. This type of termination does not require that you file a Notice of Dissolution.
- If your LLC has accepted contributions, the first step in terminating a Tennessee LLC is to file Form SS-4246, Notice of Dissolution (Limited Liability Company) with the Department of State, Division of Business Services (DBS).
- After you file notice of dissolution and wind up your business, you will have to file the appropriate Articles of Termination.
- Form SS-4245, Articles of Termination is for terminating a Tennessee LLC that has accepted contributions.
- Form 4243, Articles of Termination Following Administrative Dissolution is for LLCs that have been administratively dissolved by DBS. After dissolution, your Tennessee LLC still exists. If you do not wish to reinstate, then you file Articles of Termination.
- You can submit your original articles to DBS by mail or in person. Include a check, cashier’s check, money order, etc., payable to the “Tennessee Secretary of State” for filing fees.
Division of Business Services
312 Rosa L. Parks Avenue
Snodgrass Tower, 6th Floor
Nashville, TN 37243
615-741-2286
- The filing fee to dissolve or cancel a Tennessee LLC.
- Notice of Dissolution: $20.00
- Articles of Termination: $20.00
- Articles of Termination by Organizers: $20.00
- Articles of Termination Following Administrative Dissolution: $100.00
- You will not need to get tax clearance from the Tennessee Department of Revenue before you are able to dissolve and terminate your Tennessee LLC.
- If you mail your dissolution documents, they are processed in 3-5 business days.
- If you deliver documents in person DBS will process them while you wait.
- Tennessee DBS does not offer expedited processing.
- A Tennessee LLC will lose its name protection immediately upon filing the articles of termination.
- A Tennessee LLC that has been administratively dissolved also automatically loses its name.
- You can revoke dissolution any time before you have filed the Articles of Termination. You just file Articles of Revocation of Dissolution. There is a $20.00 filing fee.
- Tennessee requires that domestic LLCs file an annual report. If you don’t file your annual report on the due date, DBS will send a notice to the business, warning it that it could be revoked.
- After it is served with notice that DBS has grounds for revocation, the LLC has two months to file the report. If your company does not file the annual report, it is administratively revoked by the Division of Business Services.
- If your Tennessee LLC is involuntarily terminated, you must file Form 4240, Application for Reinstatement Following Administrative Dissolution/Revocation (LLC) in order to continue the LLC. The filing fee for the application is $70.00.
- You will also have to file any past due annual reports and pay the fees. The Tennessee LLC annual report fee is $50.00 per member and there is a $300.00 minimum fee.
According to form-a-corp.com, below is a breakdown of the costs required to create a LLC.
- Complete Package ($299.99)
- Form-A-Corp Fees
- Expedited State Filing Service
- LLC Kit with Seal
- Prepare IRS Form SS-4 (Employer Identification Form)
- Forms on Disk
- Express Next-Day Service
- Tennessee state filing fees ($300.00)
- Total Cost ($599.99)
Links to Online Forms Required for these Processes
According to the state of TN, you must fill out the forms listed under the "Forms for Limited Liability Companies" to create a LLC.
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