Forming a corporation can be time-consuming and more expensive than any kind of business. However, it will guarantee that you are not personally liable for legal issues linked with the business. Here is a guide on how to form a corporation.
The move to incorporate is smart. Consult with your attorney, accountant, and business advisor to define whether it’s a deal for you. They will guide you through the entire process.
- Get a corporate address and name
Conduct a corporate name search to make sure the name is unique. You don’t want to have trademark issues in the future.
- Choose a state to integrate in
Incorporating your business in your home state is not a good idea. There are numerous things to consider when selecting a location. They include tax rates, corporate laws, and incorporation costs.
- Choose the type of corporation
Define an ideal type of corporation for your company. This includes a limited liability company, C corporation, or S corporation. Look at the benefits of each and consult your advisor before moving forward.
- Choose company directors
A corporation must have directors. The position of directors must be filled in accordance with the articles of incorporation.
- Select your share type
Since corporations issue preferred and common stock, make sure you choose the best for your state.
- Get your certificate of incorporation
You can obtain this certification at the corporate filing offices for the regions where you incorporate.
- Processing and filing the incorporation
You will complete your incorporation process by an attorney or third party services. Irrespective of the option you prefer, you must file the incorporation with a certified agent.
Advantages of Forming a Corporation
The majority of small businesses in the United States are operated as a sole proprietorship. However, that grouping can leave the business owner liable for any legal issues linked to the business.
If you are planning to open a business, or you already run a business as a sole proprietorship or as a partnership. You may want to consider transforming it into a limited liability company or corporation.
When running a business as an LLC or corporation, you might see perks in many areas like:
Corporations operate as separate legal entities from business owners’ personal lives. Any lawsuit or debts are incurred by the business and not the owner. A business with potential for cases must consult with an attorney and consider LLC. Incorporating will provide an additional layer of protection. However, it’s also good to get business liability insurance.
Taxation of the company is another benefit of incorporating. A corporation is taxed at a lower rate and has good taxable benefits. Discuss with your accountant concerning the tax benefits.
Funding a small business as a partnership or sole proprietorship is hard. Corporations sell company shares and make money easier than any other type of business structure.
Getting a proper valuation of a non-corporate business is difficult. Since corporation value is based on business and not the business owner, selling it is easy.