If you choose to create your business entity as a corporation, you can choose between being taxed as a “C corporation” or an “S corporation.” The main difference between the two is that C corporations are subject to double taxation while S corporations are not.

If you choose to be taxed as a C corporation, your income will be taxed once as net income of your business and the second time as the income received by the shareholders from the corporation as dividends.

With an S corporation, the income is only taxed once at shareholder level on the money received from the corporation. Usually small business owners choose the S corporation while larger business choose the C Corporation because of its greater tax planning flexibility.

If you choose to operate your business as a corporation then your personal income and assets cannot be touched by anyone seeking to enforce claims against the corporation of collect debts. As owner or shareholder of a corporation, you are not personally liable for debts as long as you have complied with all the formalities and the corporation is still treated as a separate legal entity.

If you have also heard that Delaware is a very popular destination for those looking to form corporations, you need to know that the benefits Delaware offers are not as attractive for any type of corporation. Because the state law provides better protection for the board members in case they are being sued by shareholders and it has a court exclusively dedicated to corporate disputes, Delaware is popular place for those who are looking to form a large public corporation or are planning to go public in the near future.

But, if you are looking to form a smaller corporation, these benefits does not help you very much. Additionally, forming a corporation in Delaware while you intend to carry business in another state will involve more formalities.