Guide – How to Incorporate a Small Business
Incorporation means the act of building a new corporation that falls under the particular state’s rules and regulations. This term is also used for the formation of the LLC (Limited Liability Company). The basic idea behind incorporating a company is to enjoy the benefit where your personal assets are protected and kept away from the business entity.
In short, it does not matter which version you choose to incorporate your small business, all of them allows you to guard your personal assets, which is one of the main reason why entrepreneurs choose to incorporate their business. But before we can talk about how to incorporate a business and how Inc Paradise can assist you with it, let us understand why should you want to incorporate your small business.
Advantages of Incorporating
It does not matter if you have two people on your team or three people, everyone can enjoy the advantages of incorporation. So, if you are about to incorporate your small business (either an LLC or a corporation), here are the advantages that you would be able to enjoy:
The LLCs and corporations can both deduct the basic expenses of the business such as the salaries before the overall profit of the company is allocated to the owners.
Even though the loss and the profits normally pass-through the LLC and are reported on the owner’s personal income tax return, the LLC can also apply to be elected for being taxed as a corporation. Alternatively, the corporation can also avoid any double taxation by electing the Subchapter S tax status.
The LLCs and corporations exist unceasingly, even if the management or the ownership changes. The partnerships and sole proprietorship usually end when the owner leaves the business or dies.
In many states, no other business would be able to use the same LLC name or corporation name when they are about to incorporate their small business.
All the 50 states in the US, as well as the District of Columbia, now accept both the LLCs and corporations.
Putting the “LLC,” or “Inc” after the name of your business when you incorporate your small business, adds an instant authority. In short, your company gets the credibility it needs where the partners, vendors, and consumers would always prefer to do business with your company that is incorporated.
Personal asset protection
As mentioned above as well, this is the main reason why many often tend to incorporate their business. Both the LLCs and corporations permit the owners to divide and protect their personal assets from the company. In a company that is properly managed and structured, the owners would have the limited liability for the obligations and debts of their business. This point has been further explained below.
Incorporate your Small Business to Protect Your Assets
As compared to the general partnerships and the sole proprietorships, the LLCs and the corporations offer the highest protection of the assets. On the other hand, the general partner or the sole proprietor has unlimited personal liability for the company’s obligations and debts. This means that their personal assets such as their personal savings, car, and home would always be at risk in a judgment against the company.
On the contrary, the LLCs and corporations permit the owners to divide their personal assets and separate it from the business to protect it from the obligations and the debts of the company. In short, if you incorporate your small business and there is a judgment against the business at any point in time, it would not affect your savings, car, home or any other personal asset.
Where to Incorporate your Small Business?
A lot of the companies form an LLC or incorporate in the state where they would mainly operate the company in, which is the best choice. As a matter of fact, there are some advantages to incorporating your business in your home state, and they include:
- It is the least complicated choice.
- You can easily avoid filing the annual reports in more than one place and avoid paying the franchise taxes.
- It normally costs less as much as it would cost you for incorporating in some other place rather than in your home state.
There are a lot of companies that have incorporated their businesses and are conducting businesses throughout the world and even all over the US. And even though the above positive points were mentioned, it does not matter where you incorporate, what matters is that the state offers you the right benefits.
Moreover, if there is an LLC or corporation that has multiple business locations, the company can incorporate the small business in a single state and then register for conducting business in other additional states. All in all, this means that the companies have to first register their business, pay annual fees, and file the annual reports for conducting their business in various states.
If you are still not sure what to do and want to learn all about incorporating in various states, contact Inc Paradise for the details or check out the website for information to choose the right state to incorporate your small business.
Should You Form an LLC or Incorporate your Small Business?
Normally, many people form an LLC (Limited Liability Company) or incorporate their small business for safeguarding their personal savings, car, and home. If you choose to incorporate, it would help you to conduct business without any tension about losing your personal belongings due to the liability of the company. As mentioned above, both an LLC and a corporation has many similar benefits, but they are still different structures and have a number of differences as well.
An LLC is usually popular amongst the small business owners since they merge the flexibility and tax advantages of a partnership, and the simplicity of a corporation. Both the individuals and businesses can own LLCs. Moreover, the owners count their share of business taxes with their personal tax returns. Additionally, to govern the ownership in an LLC, the LLCs draft an internal operating agreement.
On the other hand, the corporations issue the shares of the stocks and use bylaws for setting out the laws of the management with their officers, directors, and shareholders. On that, the IRS taxes almost all the corporations at a much lower tax rate as compared to the individuals.
How to Incorporate your Small Business?
The steps are pretty simple:
- Create a business plan.
- Choose to incorporate your small business.
- Check out the companies that offer you the service while you sit at home like Inc Paradise.
- Select the kind of business you want.
- Select the state in which you want to incorporate in.
- Select the package on Inc Paradise to get the desired services.
You can also incorporate your small business easily by calling us or by letting us know online.
Incorporate your Small Business with incparadise.net
If you are still not sure about the right business entity for you, check out the Inc Paradise blog to know more about each entity and what advantages you get with them. Ensure that you should incorporate your small business with the structure that would work the best for your business plan and the industry so that you can have a successful venture.
For all your questions like which type of business structure you should choose for your business, or for any related services, Inc Paradise can assist you completely. From registration to the incorporation process, and the bank opening, Inc Paradise can assist you with the required documents. Contact us today!
Next Steps After Incorporating
After you have incorporated your company, there are many other steps that are needed, for example:
- Draft operating agreements or bylaws.
- Get the respective permits and licenses.
- Apply for an EIN.
- Open a business bank account.
- Prepare the office space or hire a virtual office address service.
For some of the additional services mentioned above, Inc Paradise can assist you. Contact us today to incorporate your small business and complete the other documentations!