How to Set Up LLC or Professional Corporations
When you form a corporation or an limited liability company, you're turning your business into a separate legal entity. Corporations and LLCs may choose an incorporator, lawyer or director to execute the formation of an LLC or corporation. The costs to incorporate or form an LLC vary from state to state. When forming a corporation, you may be subject to double taxation. However, if you choose to form an LLC, you may be able to pass your company profits and losses to your personal income tax return.
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Instructions
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Setting Up an LLC or Professional Corporation
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Select the state in which you want to incorporate or form an LLC. Many businesses choose to incorporate or form an LLC in states like Nevada, Wyoming and Delaware for their favorable tax treatment. Assuming that you plan to form your LLC or corporation without the help of an accountant or attorney, you can do the paperwork yourself or use a service, such as bizfilings.com. The cost to use an online incorporation service may range from $50 to $400.
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Check the availability of your business name. The online business service you select generally handles the company name search. Your business name will be acceptable as long as it isn't registered to another business within your state. Once you've decided on a business name that isn't in use, register your business with the appropriate government agency. Usually, the secretary of state's office in your state will be able to provide you with the necessary documents to establish your corporation or LLC.
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Complete your articles of incorporation. In most cases, your state will have a form that will allow you to simply fill in the blanks. If you're forming a corporation, you'll be required to disclose the shareholders, officers and directors of your corporation. In addition, you'll need to elect your corporate status as either a C corporation or an S corporation. S corporations are smaller than C corporations, and must have no more than 75 shareholders. S corporations avoid double taxation due to the ability of owners to pass down business profits and losses to their personal tax returns.
When forming an LLC, you'll be required to file articles of organization with the appropriate government agency. In most instances, your articles of organization will consist of a prprinted one-page document. You'll be required to disclose the members of your LLC.
For both an LLC and a corporation, you'll need to select a registered agent. A registered agent is a person authorized to receive legal documents on behalf of your business.
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Decide how to distribute company stock. As a C corporation you'll be able to issue different classes of stock like preferred or common stock. S corporations can issue only one class of stock. LLCs have members, and therefore don't have stock. However, when you form an LLC, you should create an operating agreement that indicates the responsibilities and ownership interests of the company's members.
Likewise, corporations need to create corporate by-laws that indicate how the corporation functions. Corporate by-laws address the manner in which board members are elected, and discuss the duties and requirements of company shareholders.
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Select a board of directors. Corporations and LLCs must file for an employer identification number. This can be completed on line at irs.gov. Furthermore, most states require newly formed corporations and LLCs to publish a notice of incorporation, or acknowledgment of new LLC formation in a local publication.
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