HOW IS A CORPORATION FORMED?
Corporations are business entities formed at the state level. Each state has its own set of laws, rules, and regulations that dictate how corporations: 1) are formed, 2) are generally run, 3) can or cannot do certain things, and 4) are dissolved.
HOW IS A CORPORATION DIFFERENT FROM AN LLC?
The most significant differences between an LLC and a Corporation is in a) structure and b) governance. Generally speaking, the way a Corporation is structured and run is well-defined with little room for variance. An LLC is structured and run by a contract between the LLC and its owners (Members), which makes it very fluid and adaptable. A Corporation is very rigid – the way in which it is set up and run is defined by law and practice, so there is little room to change things. The benefit of a rigid structure is predictability – everyone involved (investors, lenders, advisors, employees, etc.) knows exactly how a Corporation works. This rigid Corporate structure is also highly scalable.
An LLC, however, is a much newer type of entity, and it is designed to be very flexible. The state laws and rules that define LLCs are typically very broad – and purposefully so to allow for variation. The LLC can be structured, governed, and taxed exactly like a Corporation, but can be set up for the Members (owners) to run the LLC directly, without a board. The roles can be defined by contract (Operating Agreement) between the LLC and its Members. The obvious benefit is that an LLC can be tailored to meet the exact needs of a specific business. The drawback is that, since the baseline laws are broad, the governing documents (e.g. Operating Agreement) must be very well done to avoid surprises.
IF I FORM A C-CORPORATION, CAN I THEN CHANGE IT TO AN LLC?
Yes. States typically have mechanisms to convert one business entity type to another. Note, however, that converting from a Corporation to an LLC may result in negative tax consequences, depending on exactly what is done. Speak with a Certified Public Accountant or a Tax Attorney before you do this.
IF I FORM A CORPORATION IN ONE STATE, CAN I MOVE IT TO ANOTHER?
Yes. There are multiple ways to accomplish this, and every state will have its own mechanism and procedure.