How to Incorporate Your Business 1-2-3
How to Incorporate Your Small Business
Incorporating has several benefits. Besides protecting your personal assets, you can get lots of tax
advantages too.
If you have never incorporated a business before, you may be surprised at how easy it can be to complete
this task - with online incorporation forms that don't take long to complete.
Although it can be very affordable to incorporate your business, especially if you do it yourself, you want
to evaluate the advantages and disadvantages first to see how much your business will benefit.
Why Incorporate?
- Reduce Your Personal Risk & Protect Your Assets
- Get Tax Advantages & Cut Your Taxes
- Establish Credibility: Boost Your Business Growth & Attract Investors
There are also different ways you can incorporate your business. Form a C Corporation, Limited Liability
Company, a Non-Profit Corporation or an S Corporation. You can either incorporate in your own state or form a
Nevada or Delaware corporation, as these states have several tax advantages.
American Incorporators
offers the easiest, most convenient afforadable
incorporation method we've found. In fact, this is the company we used to incorporate Home Business
Center, Inc. American Incorporators will answer your questions before you incorporate, so don't
hesitate to contact them. I continue to call them years after incorporating, and they still are happy to
answer my questions.
Click & Inc is another good company. They charge a little more for
their work, but they do the research for you, and they include everything in their flat-fee cost. Get
your incorporation documents filed in 24 hours with their special Incorporation Kit
Decide the State in Which to Incorporate Your Small Business
Once you've decided
to incorporate your small business the next step is deciding which state to incorporate in. A common
misconception is that businesses must incorporate in their state of operation. You can, in fact,
incorporate in any one of the 50 states and the District of Columbia regardless of where your business
currently operates.
It is perfectly acceptable to incorporate in a state other than your current area of operation, but it is
not always a good idea to do so. If your company chooses to incorporate in a state outside its area of
operation life becomes a little more complicated. Your business becomes a "foreign corporation" in any state
outside of the state it is incorporated in.
If a corporation is "transacting business" in a state other than where it is incorporated, it must register
for a certificate of authority to transact business in the other state or possibly lose access to that state's
courts and face fines.
Registering for a certificate of authority, of course, costs money and is only one step in the process of
qualifying to do business as a "foreign corporation" in another state.
There are advantages to incorporating in different states with regard to corporate laws and tax structure.
Delaware is by far the most popular state for incorporation. Most of the fortune 500 companies are incorporated
in Delaware.
Some of the most attractive features of incorporating in Delaware include:
- Lack of corporate income tax for corporations incorporated in Delaware but not transacting business in
the state.
- Delaware has a separate corporate law system that uses judges appointed for their knowledge of
corporate law as opposed to juries, whose knowledge of corporate law is limited at best.
- Shares of stock owned by persons outside of Delaware are not subject to Delaware taxes.
For a small business deciding weather or not to incorporate in Delaware it is necessary to measure the cost
of qualifying as a "foreign corporation" in the state of operation versus the amount that will be saved by
incorporating a small business in Delaware.
Typically it is not advantageous for small businesses to incorporate outside of their home state as even
small businesses are usually required to pay corporate taxes in both the state of foreign operation and the
state of incorporation. If you're not sure where to incorporate, visit www.small-business-assistance.com. We can help you decide
if the cost of local incorporation will be less than incorporating in another state.
Jacob Wren operates Small Business Assistance ( http://www.small-business-assistance.com ) - a resource
site for entrepreneurs that offers advice on incorporating and an array of other small business topics.
Tax and Legal Help Guide
If you're starting your own business for the first
time, you've probably got a lot of questions. Many of these questions apply to different areas of business
- tax advice, legal issues, insurance, bookkeeping, etc.
Rather than ask lots of people to find the answers to all of these questions, wouldn't it be easier to get the
answers all from one source? In fact, if you are new at this, there are probably several questions that
you need answers to - that you never even thought to ask.
I ran across a great guide called "Working for Yourself: Law & Taxes for Independent Contractors, Freelancers and
Consultants". It's got all the essential information that new businesses need, and it's published by
NOLO - which means it's written in plain English that we can all understand.
A worthwhile invesment for all small business owners, you'll be able to refer back to it over and over
again.
Is Your Business Legally Prepared?
It is imperative to have your business legally prepared. How you ask? You need to have
a business license, a home occupation license, if running your business from home, a city or county license,
(depending on what State you live) plus you need to register your business as fictious if you are not using
your name as a business. For instance, If John Doe has a business name as John Doe's Grooming Parlor, a
fictious name isn't necessary.
When opening a business in your residence, additional information is required. Some businesses require more
than a city license to be fully licensed. Please check with your local city & state office for detailed
information.
While it is my understanding that there are many businesses who are operating "under the table", so to
speak, I highly advise against this practice. If you are just interested in selling a few things out of your
home, don't worry about this section, as you should not have any form of tax liability for selling your own
belongings. However, if you start a business to make some money, you need to look at the legal aspects of
running a business. Eventually, those who operate under the table will be caught.
If you are running an internet business it is not as anonymous as some people may believe. Keep in mind, the
government designed the Internet in the first place! They know how it works! Legalize it and you will sleep
better at night!
It really is simple. This is not as complicated as you think, so don't worry! I know I fussed and fretted
over this for a good while and when I actually went "legal", I kicked myself because the process was so
simple.
Follow the steps below to get you started:
-
Determine the type of home business you want to start. Sole Proprietorship, Partnership or Corporation.
* A Sole Proprietorship is the least costly and least complicated way to set up your
business. Remember that a Sole Proprietorship is totally dependent upon your ability to work and have
good ideas for growth. There is no other person in the business to rely on.
* A Partnership happens when two or more entrepreneurs form a company. Legal fees for setting
up such an arrangement are usually more costly than those required for a Sole Proprietorship and less
costly than a Corporation. The up side of a Partnership is more capital for growth and more ideas for
how to grow the business. The downside is getting rid of a bad partner.
* A Corporation is the most complicated and most costly of the three options. The ongoing
accounting, legal, and tax reporting obligations of a Corporation are much more complicated than for
the other two options. Corporations have boards, shareholders, and shared responsibility for the
business. It is necessary to keep everyone informed of decisions, the company's financial status, and a
host of other actions.
It is wise to seek the advise of an attorney in the beginning of your work-from-home situation in
order to avoid serious problems later on. An attorney will guide your decision about what legal form
your company should take.
- If using a fictious name for the business, it must be registered first with the state. Call your city
& state office to find out their phone number. Usually, you can do this online. Visit their site and
fill out a fictious name form. A fee may or may not apply.
- Is your home located in the city? Some states like Florida require a county license if your busines
isn't located in the city. If not sure, contact your local jurisdiction office for licensinig
information.
- Complete the home occupation application and the business license application. You may download the
forms from your city hall website. Call your city hall office to find out their website address and
fees.
-
Forward your applications and fees to your city hall office either by mail or by visiting the office.
They will usually accept cash, checks, debit cards, VISA, MasterCard or American Express credit cards.
Again, check with your local city hall office.
If you visit in person with your applications and appropriate fees, you will get your business
licenses the same day. However, if you do all of this by mail, you would need to wait at least 2 to 3
weeks to receive your licenses. Either way, you are on the right track.
Congratulations!! Please click here for more articles about law and legal services...
About the author: Sonia Colon is owner of a successful online specialty giftstore "Jimson Products"
(http://www.jimsonproducts.com).
Incorporating your business is a big decision and not one to take lightly. There are many factors that
affect your business when you incorporate, and although forming your business is not extremely difficult,
changing your business structure later can be a hassle, so you want to make the right choice the first
time.
And incorporating is not right for evey business. If you want to learn more about business incorporation, a
great way is to go to the website of an incorporation company that offers business structuring services and see
the steps they take. Read their frequently asked questions sections and get your questions answered. When I
incorporated my company several years ago, I used an online service (American Incorporators), and I still can call them up
anytime to get basic questions answered about coporation documents, etc. It's a nice benefit.
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