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Incorporating Your Business Using Three Simple
Steps |
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by: Abe
Cherian |
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Incorporating Your
Business Using Three Simple Steps
By Abe Cherian
Copyright ?
2005
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.
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
¡è A
corporation's life is not dependent upon its members.
A
corporation possesses the feature of unlimited life. If
an owner
dies or wishes to sell their interest the
corporation will
continue to exist and do business.
¡è Retirement funds
and qualified retirement plans "like
401k" 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 of
stock.
¡è A corporation
possesses centralized management.
Corporations are not
without disadvantages. The primary
disadvantage to a corporation
is double taxation. Profits
of a corporation are taxed twice
when the profits are
distributed to shareholders as dividends.
They are taxed
first as income to the corporation, then as
income to the
shareholder.
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.
Other Disadvantages
Include
¡è There is a certain level of complexity and
expense of
forming a corporation.
¡è Corporations
have extensive record keeping requirements.
¡è Operating
a corporation across state lines requires the
corporation to
qualify to do business in the other state.
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.
About the author:
Abe Cherian is the founder of
Multiple Stream Media,
a company that helps online businesses
find new
leads and more customers without spending a fortune.
http://www.multiplestreammktg.com
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