How Would I Complete a “Do-It-Yourself” Incorporation?
There used to be a time when incorporating was a long and arduous process. Very little was centralized, and it required you to either go sit in an office all day, waiting for paperwork, or pay a lawyer to do all of it for you. However, thanks in large part to the Internet, incorporating your business has never been easier. There is a wealth of information that is just a quick Google-search away, so you no longer have to rely on someone else’s knowledge.
Paperwork is downloadable, payments can be made online, and any correspondence can be done in the comfort of your own home. Centralization is still a bit of an issue, so for your convenience we have compiled a list of five important things to do when completing a do-it-yourself incorporation.
Ask Yourself If It is Worth It
Put simply, the answer to this question is probably yes. Incorporation protects your personal assets in case the business goes under, and removes some of the tax burden when April rolls around. However, you do need to know that incorporating a business takes a bit of time and requires focus. You do not want to go halfway only to decide it isn’t worth the time and lose all the money you’ve already spent. So just remember that incorporating is not entirely automated yet, and you will likely hit a roadblock or two along the way.
Determine Your State of Incorporation
One of the great things about incorporating is that you do not need to live in the state you incorporate in. Incorporation creates a legal entity separate than yourself, so it can live wherever you want it to. Certain states, like Nevada and Delaware, offer tax breaks and a wealth of resources to owners who incorporate in their state. Each state is different though, and sometimes it may not be worth the fees that come with incorporating in another state. For a small, physical business that primarily deals in the community it is located within, incorporating in another state is probably an expense that isn’t worth the benefits. When you do decide on the state, visit their website. Most, if not all, of the necessary paperwork will probably be listed together.
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Determine What Kind of Corporation You Want
Professional corporations, S-Corporations, C-Corporations, Non-Profits—each one of these has their own benefits and pitfalls. Depending on your business, the choice may be fairly obvious; a Non-Profit proprietorship would probably want a Non-Profit Corporation. However, the choice is probably not so obvious. Take a hard look at your business and your plans for the future, and only then make your choice as to which entity you prefer.
Apply for an EIN
The IRS, in order to keep track of business entities, assigns a Federal Tax-ID called an Employer Identification Number. If you incorporate, you will need to apply for one. While your Social Security Number will work for a sole-proprietorship, creating a legal entity complicates the matter a bit. You will need an EIN to open up bank accounts for the business, hire employees, and operate as a corporation.
Above all else, do your research. As we said before, the Internet is a powerful tool and you can find a lot of answers to your specific questions simply by using Google or checking out the State’s webpage. There are also plenty of forums to help you along your way and answer questions. It is always useful to contact an expert as well; while they may have an advising fee, it will be worth it to save the headache later on.
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