At some point, every small business needs to incorporate, and the type of company you choose to form will influence your business at every point in the future. If you’re unsure of where to start, Ndiwano can help you understand the options you have for incorporating and why you might choose one type over another. Then, you can dive into the 5 steps it takes to incorporate your small business:
Types of Corporations
First off, corporations are regulated by different laws and have varying tax requirements. Here are the 3 major corporation types you can choose from:
C corporations pay their own taxes that are incurred by the company itself. Meanwhile, employees and owners still pay their own income tax on what they receive from the company.
S corporations aren’t required to pay taxes. However, owners and employees of S corporations do pay taxes on their own income.
Limited Liability Companies
Limited liability companies (LLCs) are a type of corporation in which the owner is not responsible for company liabilities or debts. This helps separate an individual from a business in terms of legal issues.
Whereas a sole proprietorship means you and your business are legally one and the same, an LLC recognizes the business as a separate entity. This is popular among freelancers and other owners of small, service-oriented businesses.
How to Incorporate Your Business in 5 Steps
Incorporating your business isn’t so daunting when you break it up into 5 manageable steps and take one at a time.
Step 1: Check the Availability of Your Business’s Name
You won’t be able to incorporate using a company name that has already been taken. Search the availability of your company name using the U.S. Patent and Trademark Office (USPTO)’s online database, which mines through all trademarked business names for any matches.
Step 2: Create Your Business’s Articles of Incorporation
Articles of incorporation are documents you file when you register your business. They act as charters that establish your business’s existence, stating its mission and purpose. You can hire a writer to help write your articles of incorporation, or you can look at example articles of incorporation from other companies, and craft your company’s own document.
Step 3: File Your Articles of Incorporation and Pay the Fee
After you have your document ready, the next step is to actually file for incorporation by submitting your articles of incorporation and paying the fee. Every state has its own application, which is typically online.
Step 4: Create Bylaws and a Records Book
Your company’s bylaws outline the significant policies or rules that govern it. It includes the internal policies that the employees and the company itself must adhere to. For example, when will board meetings be held? How will records be kept?
Speaking of records, your company records book should act as a ledger proving IRS compliance, so be sure to have it ready to go.
Step 5: Hold a Board Meeting
Holding a board meeting is a required step in incorporating a new business. The agenda for this meeting is fairly straightforward since it’s all about adopting the bylaws and articles of incorporation. At this meeting, you can set future meetings and appoint officers to represent your corporation.
You might also choose what tools you’re going to use to stay organized and track expenses, such as the cloud-based tool AND.CO.
Hopefully, after reading this post, you’re ready to start the process of incorporating your small business. As a business owner, it’s very important you establish your business’s legitimacy with the government for tax and liability purposes, and to separate yourself and your business as different entities as far as legal matters are concerned.
To search for helpful Ndiwano freelancers that can streamline the incorporation process, click here.