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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
