Incorporating Your Business Using Three Simple Steps

Incorporating your business today is much easier than itwas 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.When incorporating, you must first ensure that yourcorporate name is available in the state in which you wantto incorporate. Your corporate name must not be deceptivelysimilar to a name that is already in use in that state. Aname check must be performed in the state of incorporation.You must also prepare and file all the necessarydocumentation. the Articles of Incorporation, with theappropriate state agency in the state of incorporation.Additionally, you must pay all state filing fees, initialfranchise taxes and any other initial fees. Each statecharges a filing fee to form your corporation in thatstate. These state filing fees vary greatly by state. Theyrange from under $100 to over $400.Do It Yourself. Use An Incorporation Service Provider OrUse An Attorney. If you decide to incorporate on your own,you need to be well versed in the laws of the state ofincorporation. You will need to prepare and file your owndocumentation and undertake all communications with thenecessary state agencies.If you use an incorporation service company, you submit thenecessary information, and the company checks your name,prepares and files your documents and pays the initialstate filing fees on your behalf.Incorporation service companies charge a nominal servicefee on top of the state filing fees, and you can submit allthe necessary information to them over the Internet.Attorneys will also undertake all of the necessary stepsfor you. If you use an attorney to incorporate, you canexpect to pay their hourly fee on top of the state filingfees.How long this will take depends on the time the staterequires to approve and return your completed Articles ofIncorporation varies by state. On average, it takes 4-6weeks to become incorporated. Most states will allow you to expedite the filing processfor an additional charge. Expediting filings typically takeabout 1 week. Those charges also vary by state.After your corporation is formed, an organizationalmeeting of directors must be held. At this meeting bylawsare adopted, stock is issued and the incorporation processis completed. Minutes of the organizational meeting shouldbe kept in a corporate record book.Incorporation is an important step in the life of abusiness, but unfortunately the true value of incorporatinga business is often not seen until the business faces anegative situation such as a law suit or bankruptcy. Aprimary advantage of incorporation is the limited liabilitythe corporate entity affords its shareholders "The Owners". Typically, shareholders are not liable for the debts andobligations of the corporation. Creditors will not comeknocking at the door of a shareholder to pay debts of thecorporation. In a partnership or sole proprietorship theowner's personal assets may be used to pay debts of thebusiness.Other Advantages include¡è A corporation's life is not dependent upon its members.A corporation possesses the feature of unlimited life. Ifan owner dies or wishes to sell their interest thecorporation will continue to exist and do business.¡è Retirement funds and qualified retirement plans "like401k" may be set up more easily with a corporation.¡è Ownership of a corporation is easily transferable.¡è Capital can be raised more easily through the sale ofstock.¡è A corporation possesses centralized management.Corporations are not without disadvantages. The primarydisadvantage to a corporation is double taxation. Profitsof a corporation are taxed twice when the profits aredistributed to shareholders as dividends. They are taxedfirst as income to the corporation, then as income to theshareholder.All reasonable business expenses such as salaries aredeductions against corporate income and can minimize thedouble tax. Further, the double tax can be eliminated bymaking the S corporation election with the Internal RevenueService.Other Disadvantages Include¡è There is a certain level of complexity and expense offorming a corporation.¡è Corporations have extensive record keeping requirements.¡è Operating a corporation across state lines requires thecorporation to qualify to do business in the other state.Both the Limited Liability Company "LLC" and "S"corporation also provide the limited liability to theowners/shareholders of the company, without the potentialdisadvantage of double taxation. While like corporationsthese two entities also have advantages and disadvantages,it is a good idea to learn about all three when decidingwhat form your business should take.