Incorporating Your Business Using Three Simple Steps
Incorporating your business today is much easier than it was 10 or even 20 years ago. Here's three steps; securing your corporate name, filing the necessary documentation and paying the necessary filing fees. You can complete these steps yourself, use an incorporation service provider or have an attorney complete them for you...read more
When incorporating, you must first ensure that your corporate name is available in the state in which you want to incorporate. Your corporate name must not be deceptively similar to a name that is already in use in that state. A name check must be performed in the state of incorporation.
You must also prepare and file all the necessary documentation. the Articles of Incorporation, with the appropriate state agency in the state of incorporation.
Additionally, you must pay all state filing fees, initial franchise taxes and any other initial fees. Each state charges a filing fee to form your corporation in that state. These state filing fees vary greatly by state. They range from under $100 to over $400. Do It Yourself. Use An Incorporation Service Provider Or Use An Attorney. If you decide to incorporate on your own, you need to be well versed in the laws of the state of incorporation. You will need to prepare and file your own documentation and undertake all communications with the necessary state agencies. If you use an incorporation service company, you submit the necessary information, and the company checks your name, prepares and files your documents and pays the initial state filing fees on your behalf.
Incorporation service companies charge a nominal service fee on top of the state filing fees, and you can submit all the necessary information to them over the Internet. Attorneys will also undertake all of the necessary steps for you. If you use an attorney to incorporate, you can expect to pay their hourly fee on top of the state filing fees.
How long this will take depends on the time the state requires to approve and return your completed Articles of Incorporation varies by state. On average, it takes 4-6 weeks to become incorporated.
Most states will allow you to expedite the filing process for an additional charge. Expediting filings typically take about 1 week. Those charges also vary by state.
After your corporation is formed, an organizational meeting of directors must be held. At this meeting bylaws are adopted, stock is issued and the incorporation process is completed. Minutes of the organizational meeting should be kept in a corporate record book.
Incorporation is an important step in the life of a business, but unfortunately the true value of incorporating a business is often not seen until the business faces a negative situation such as a law suit or bankruptcy. A primary advantage of incorporation is the limited liability the corporate entity affords its shareholders "The Owners".
Typically, shareholders are not liable for the debts and obligations of the corporation. Creditors will not come knocking at the door of a shareholder to pay debts of the corporation. In a partnership or sole proprietorship the owner's personal assets may be used to pay debts of the business.
Other Advantages include
All reasonable business expenses such as salaries are deductions against corporate income and can minimize the double tax. Further, the double tax can be eliminated by making the S corporation election with the Internal Revenue Service.
Both the Limited Liability Company "LLC" and "S" corporation also provide the limited liability to the owners/shareholders of the company, without the potential disadvantage of double taxation. While like corporations these two entities also have advantages and disadvantages, it is a good idea to learn about all three when deciding what form your business should take.
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