There are many pros and cons that factor into forming a corporation or limited liability company (LLC). That’s why its important to investigate and research the laws and policies relative to your specific business goals and business type to fully maximize the benefits of incorporating. Here are some criteria to keep in mind when learning more about incorporating your business. We’ll also cover how to incorporate your business.
Incorporating Your Business
“How to incorporate your business?” The protocol of incorporation is usually the same incorporation process across the states.
These basics include:
- Selecting your business name
- Recruiting and/or appointing members/managers (LLCs) or director(s) (corporations)
- Selecting your incorporation type
- Filing incorporation paperwork
- Opening a bank account for your business
Additionally, these other factors are helpful in determining which incorporation type is best suited for your business:
- Businesses providing professional services. If providing a licensed, professional service, consider forming a professional corporation or a limited liability partnership. It is advisable to contact your licensing board to determine your requirements. Professional corporations (PCs) are allowed to be formed as are professional limited liability companies (PLLCs).
- Initial report and business license requirement. Requires corporations and LLCs to file an Initial List of Officers/Directors and Business License on or before the last day of the month following incorporation.
- Federal tax identification number (EIN). Corporations and LLCs that have employees are required to have a Federal tax identification number (EIN). Additionally, an EIN may be required to open a business bank account.
- State tax identification number. To do business in the states, a state tax identification number is necessary.
- State S corporation election. Recognize the federal S corporation election.
- Business purpose. Allows corporations and LLCs to be formed for any lawful business activity. There is no need to state the corporate purpose in the Articles of Organization or the Articles of Incorporation.
- Stock. Corporations can purchase, sell, hold and even transfer shares of their own company stock. However, corporations are required to list authorized shares and par value in the Articles of Incorporation. An increase in the number of shares or par value can affect initial filing fees.
- Registered agent. Corporations and LLCs must list the name and address of a registered agent with a physical address (no post office boxes). The registered agent must be available during regularly scheduled business hours to accept important legal and tax documents for the business.
Many entrepreneurs and small business owners enjoy the benefits of having their companies incorporated. Just keep in mind that consulting with an attorney or accountant helps clarify if these benefits will work for your business type and goals. Learn more about the Different Types of Businesses.