Steps a Business Must Take to Incorporate
If you are a new business owner, you may be pondering whether to incorporate your business. This step creates a separate legal entity, provides you with maximum legal protection and creates separation between your business and personal assets.
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Choose a Business Name
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Choose the name of your business. The name should be easily identifiable and indicative of the industry you're in. Choose a business name that is catchy and separates you from the other companies in your industry. Before officially deciding on a name for your business, make sure the name isn't taken by another corporation located in your state. If you're paying an agency to file your incorporation papers, it will handle this step for you. If not go, to the website belonging to your state's incorporating agency. You'll be able to type your business name in the proper search box to make sure it isn't taken by another company.
Type of Corporation
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Decide what type of corporation your business will be: a C corporation or S corporation. S corporations, smaller than C corporations, are limited to having no more than 75 stockholders. In most cases, stockholders in an S corporation must be either a U.S. citizen or resident alien. S corporations can't issue more than one kind of stock, where as C corporations may have common and preferred stock. S corporations avoid the double taxation that C corporations face, because income can be passed to individual stock holders without tax. If you're a small business looking to incorporate, an S corporation designation may be the best entity to form for your business.
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Select a State
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Choose a state to incorporate in. Many businesses incorporate in states like Nevada and Delaware because of favorable tax laws, including the absence of a state tax. The state you decide to incorporate in doesn't have to be the state where your primary operations take place. However, you do need a registered agent with a physical address in your incorporation state.
Paperwork
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You'll have to complete your incorporation documents, such as your articles of incorporation. Most states will issue preprinted articles of incorporation for you. You'll have to include the purpose of your business and the names and addresses of those involved in the incorporation of your business. Create bylaws that clearly state how your company operates, the duties of directors and managers, and the responsibilities of your company's stockholders.
Choose a Registered Agent
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Select a person designated to be the registered agent for your corporation. Every state mandates this. Your registered agent has to have a physical address in your state of incorporation. For example, if you operate your business in Illinois, but you're incorporated in Wyoming, you need a registered agent who has a physical address in Wyoming. Many companies offer registered agency services to businesses who find themselves in similar situations. Your registered agent is responsible for receiving your tax and other legal paperwork. Once you've completed your paperwork, submit your documents to the corresponding Secretary of State, along with payment for the various fees charged. You may be charged anywhere from $100 to $400 to incorporate your business, depending on your incorporation state.
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