Incorporating a small business
Why do people incorporate their businesses? Well, for one, it is to protect themselves by creating the legal entity recognized by the state and required for the peaceful continuation of their livelihoods. Incorporating your business will safeguard your personal assets in case of a risk situation. Creditors will spare your personal assets but go after the corporate ones. It also helps you with your taxes. How? Health insurance and medical costs are subject to tax deductions while social security requires lower payments. So how do you go about safeguarding yourself and incorporating your small business?
Which Incorporation?
It's not a difficult piece of work, and professional incorporating agencies make the task easier. The corporation is not an extension of its owners, but exists as an independent body. However, before you go ahead with the process of incorporating your small business, you must meet with your lawyer and accountant to know the details involved. The business you want to incorporate should obviously be incorporated in the place from where you intend to do the business.
The next step would be to decide what type of business you want to establish. Would you prefer to go in for Sole Proprietorship or general partnership? Or would you rather incorporate your business and cover yourself from liability?
Which of these should you opt for? That would depend largely on the number of people involved in the corporation, the nature and size of your business, the nature of work that the business will conduct, and your aim to make profit or not. For example, if you are a professional such as a doctor or lawyer, you could opt for the Professional Corporation.
Why Incorporate
Unlike in a Partnership where the liabilities and obligations are shared by the partners, a sole proprietorship puts the onus of risk and liability on the sole owner of the business. However, in both cases, the owner/s is/are liable for damage and personal assets are at risk. Not so with an incorporation.
How to Incorporate
Before you incorporate, you have to ensure that the name you want for your incorporation is available. If it is, you will have to reserve it. Once this is done, the incorporating agency you have hired will draw up the Certificate of Incorporation and route the filing fees to the relevant state agencies. The document you file to incorporate your business is called the Article of Incorporation. The certificate of Incorporation is a state document that asserts the validity of the corporation.
Information for Certificate of Incorporation
The one-time fee for registering incorporation and the relevant annual tax varies from state to state. However, not every body who wants to incorporate a business needs to approach an agency. Besides the agency, attorneys or the individuals involved also could carry out the process over phone, online, or in person.
While you could incorporate your asset in one state and do business from another, it would be easier to conduct and incorporate a business form the same state.
So if you are ready to incorporate your small business and maintain incorporation status, you only have to choose a name for your business and decide on the place from where you want to run your operations.
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