How it Can Benefit Your Business to Incorporate
What is Incorporation?
Incorporating a small business creates a legal entity registered with the state called a corporation that has authority to act through the articles of incorporation, bylaws, and other governing documents and corporate forms. Incorporating a business provides protection against your personal assets being used to pay corporate debts and there are tax and other advantages available through incorporating a company. When you incorporate companies as stock corporations, you may sell stock as a means of raising start up capital by selling shares of ownership in the company. After you incorporate a business, you may also raise capital later by selling additional shares as authorized in the articles of incorporation, also called the certificate of incorporation.
The incorporator is a person who acts on behalf of the company to file the incorporation forms and do what is necessary to form a corporation until it is registered with the secretary of state. It is possible for an incorporator to later be a shareholder, director, or officer of the incorporated entity after formation.
Limited liability corporations also require incorporation, but the filing requirements are less burdensome. In an LLC corporation, the governing document is called the operating agreement. If you want to start a business, whether it's a stock corporation, S corporation, LLC incorporation, or other business entity, and are wondering if you should be incorporated or how to incorporate, it is important to use the proper incorporation forms that comply with the laws of the state of incorporation.
Benefits of Incorporation
Some of the benefits of incorporating include the following:
- When a company incorporates, because of the corporate shield against personal liability, those with ownership in a corporation can protect personal assets from being attached to pay corporate debts.
- There may be tax advantages available by being taxed at a corporate rate and filing as a corporation. Individual tax rates may be lower or higher than corporate tax rates. An incorporated entity can deduct certain business expenses and losses.
- Business incorporation allows you to control how your ownership in a corporation will be handled if you wish to disassociate, are disabled, deceased, etc. When you incorporate a company, you can create a buy-sell agreement to cover the terms for transfer of stock ownership of a shareholder or member.
How to Incorporate
When you decide upon a business plan, you can use the incorporation services offered by US Legal forms or download an incorporation form package from US Legal Forms which includes step-by-step instructions and forms for reserving a corporate name, filing articles of incorporation, and creating bylaws and organizational minutes. After filling out these forms, the incorporator will need to obtain a federal tax identification number and set up a corporate bank account. Incorporating a company can be done inexpensively without using an attorney.
Incorporating your business can be done through our online incorporation services or by completing an incorporation package for $49.95-$199.95, a bargain price compared to the legal fees of incorporating a business through a corporate law firm. The incorporation forms offered by US Legal Forms are state-specific and can be modified in Word if desired to suit your needs.
What are the advantages & disadvantages of incorporating?
Benefits of incorporating will vary by circumstances in each case, but one of the benefits of incorporation includes the limited liability protection of the shareholders (the business owners of a corporation) that protects personal assets from being used to pay debts of the corporation. Ownership in a corporation is shielded from personal liability for corporate actions.
In many cases, the corporate tax rate is favorable to the individual tax rate of a sole proprietorship or partnership. There are other reasons to incorporate a company, such as raising capital through issuing stock to shareholders and being able to control management and transfer of ownership, among others.
The main disadvantage of incorporating is the procedural formality associated with incorporation. There are incorporation forms that must be filed when one incorporates a business, such as the articles of incorporation or certificate of incorporation. The state of incorporation will also require an annual filing, as well as filing fees to be paid. Local licensing and permits may also be required. Additional rules apply when stock is publicly traded.
Incorporating a small business can be done easily and inexpensively using our state law-specific business incorporation packages with instructions for how to incorporate. US Legal Forms offers individual forms to incorporate a business as well, along with thousands of corporate and small business forms for all your company needs.
What are the tax advantages to stock corporations or LLC's?
Depending on the tax rates at the time, the corporate tax rate may be lower than the individual tax rate. A corporation may also elect to be an S corporation in order to have income taxed on individual returns. In the same manner, a limited liability company can take advantage of corporate tax rates of choose to be taxed like a partnership. Incorporating your business may also allow you to take tax deductions for business expenses and capital investments.
Is incorporation online legally valid?
Yes, when you purchase a US Legal Forms online incorporation package or incorporation forms, you receive business incorporation forms that have been professionally drafted to comply with the laws of the state of incorporation. The incorporation forms package contains the forms you need to start a company legally, as well as easy to follow step-by-step-instructions for creating an incorporated entity.
Who is the incorporator?
The incorporator is the person responsible for forming the corporation and seeing that all the necessary paperwork and filings are made to get incorporated. The incorporator will typically be named in the articles of incorporation that are filed with the state when you start a company. After the corporation or LLC is formed, the incorporator is allowed to also be a director, officer, or shareholder of the incorporated entity.
Is incorporating a business hard to do?
Incorporating a company and LLC incorporation can be accomplished by anyone without the need to hire a lawyer. Using an incorporation package that is specially designed for your state, or one of US Legal Form's online incorporation forms, a business can get incorporated using easy to follow steps and without the need to hire an attorney to incorporate a company.
After filling out the proper incorporation and article of incorporation forms for your state of incorporation, using the instructions in the US Legal Forms incorporation forms package, they are sent to the appropriate state body, usually the secretary of state. After filing, along with the necessary filing fees, the corporate identity is established.