DIY Incorporation: Everything You Need to Know
With proper planning and research, small business owners have the option of incorporating when their business is ready to expand and gain additional benefits.4 min read
With proper planning and research, small business owners have the option of incorporating when their business is ready to expand and gain additional benefits. The process can be time-consuming, but with effort and additional resources, incorporating can provide business owners personal asset protection and the ability to raise capital.
Conversely, when business owners move from a sole proprietorship or partnership to an incorporated entity, there are disadvantages as well. You will be required to pay fees in the initial process as well as maintenance expenses. Where your business is located will play the biggest impact on the cost of incorporating as each state has their own set of rules and fees.
Types of Incorporation to Choose From
- Limited liability company
- General partnership
There are multiple forms of incorporation to choose from. Each form has advantages as well as disadvantages. The biggest differences in the business structure you choose to operate under will lie in tax treatment and the regulation of stock offerings.
C-corporations are what the majority of large corporations in the United States operate as. While limited liability companies, LLC, and S-corporations are popular as well, it is important to research and choose the structure that best suits your business.
Can Business Owners Choose How to Incorporate Their Companies?
Ranking 7th in the nation among corporate tax-friendly states, Texas has tax rates that ranked 43rd compared to rates in other states. Fortunately, business owners have the option of choosing where they want to incorporate. It does not matter where your facility is located or where you are offering your product or services, you may choose to incorporate in any state. Keep in mind that each state will vary in how corporations are treated in terms of taxes and regulations.
Tips for Incorporating a Business
When incorporating, you must check with the state's registrar office to ensure the name you wish to operate under is available. This rule is applicable to both new businesses and for existing proprietorships and partnerships before incorporating can take place.
Next, you must decide if you want to sell shares of stock in your business. If interested, there are several decisions to be made in regards to stock, such as how many you want to offer initially at your public offering, also known as IPO. You will need to decide exactly the amount of shares that will be granted to management and how many will be available in the future.