how to incorporate guide

7/27/2019 How to Incorporate Guide

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The Company Corporation and LLC.com. All rights reserved.

Why The Company Corporation............................................................................................................................................1

How to Incorporate or Form a LLC ...................................................................................................................................... 2

Step 1: Assess Your Needs ...................................................................................................................................................... 3

Step 2: Choose a Business Name ......................................................................................................................................... 4

Step 3: Choose the State Where You Will Incorporate or Form Your LLC ............................................................... 5

Step 4: Decide What Type of Company to Form (LLC or Corporation) ....................................................................7

Step 5: For LLCs Only .................................................................................................................................................................8

Step 6: For Corporations Only ................................................................................................................................................9

Step 7: Let The Company Corporation Handle it for You ..........................................................................................11

Other Services The Company Corporation Can Help You With ..............................................................................13

Table of Contents


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For more than 100 years, companies big and small have trusted The Company Corporation and its parent company,Corporation Service Company, to meet their business compliance needs. We have o ces in all 50 states and the District of Columbia. We can prepare and le your formation and regulatory documents faster than anyone in the business.

The Company Corporation doesnt just help businesses incorporate - we also specialize in helping customers meet theircompliance needs after theyve incorporated. By working with thousands of customers over the years, weve learned theins and outs of compliance management. Our services allow our customers to focus on growing their business, whilewe focus on their compliance requirements and the formalities of running a business.

For more information on The Company Corporation and how we can help you with any of the items in this guide, contactus at any time using one of the following methods:

Website: www.incorporate.com

Phone: 866-963-7593

Email: [email protected]

***DISCLAIMER The services and related information provided by The Company Corporation (TCC) do not constitute legal advice,but rather serve as general information to help you manage your business. TCC is not a law rm and our services and informationare not a substitute for the assistance of an attorney or nancial advisor.

Why The Company Corporation
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Dear Business Owner,

Congratulations! By requesting this guide from The Company Corporation, youve taken the rst step toward incorporat-ing your business. As you may know, thousands of business owners around the country each day put their personal assetsat risk by operating as sole proprietorships. Incorporating or forming a limited liability company (LLC) is an easy, fail-safeway to separate your personal assets from your business assets. When we refer to incorporating, we mean the act of creat-ing a new corporation or the formation of a Limited Liability Company (LLC) under the laws of a particular state.

This guide will help you understand the bene ts of incorporating, the di erences between corporations and LLCs , and theprocess for forming your own business. We promise to make that process as smooth as possible. Weve helped hundreds of thousands of business owners just like you reach their goals. Visit us online at www.incorporate.com or call 1-800-209-0128to speak with a Business Specialist over the phone for more personalized service.

Lets get started.

Sincerely,David Gilardi

P.S. Keep in mind that The Company Corporation is a service company and does not provide legal or nancial advice.

How to Incorporate or Form a LLC
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Youve come up with a great idea for a business, and written a solid business plan. Now what? Its time to choose thelegal form of your business. This choice matters from Day Oneselecting the right form of business can protect youfrom tax liabilities and potential legal problems. This may sound easy, but the most obvious form of business isnt always the right one for you. For example, even if yourea solo business owner with no partners or employees, forming a sole proprietorship isnt necessarily the wisest decision.Before you investigate the business entity options available to you, whether sole proprietorship, general partnership,corporation or LLC, here are some things to think about.

Take notes as you consider these questions. This will make it easier to start the process of incorporating or forming anLLC by calling a Business Specialist at 1-800-209-0128 or visiting us online at www.incorporate.com .

Step 1: Assess Your Needs

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Do you want to protect your personal assets (your home, car, savings, etc.)?

Does your business sell goods or services to the public and/or other businesses?

Does your business bring customers into your store, o ce or home o ce?

Are you entering into a business with family or friends?

Do or will you have employees?

Do or will you have business partners?

Do or will you have investors and shareholders?

What kinds of shareholders do you want in your business? Will they have decision-making power?

Would you like the option to raise capital through the sale of stock?

Do you want to be able to deduct business expenses?

Yes NoIssues to Consider
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Step 2: Choose a Business Name

The name of your business can mean the di erence between success and failure. In todays global market, where Internetsearches and social media are key to a companys marketing strategy, a business name thats hard to remember, say or spellcan cripple your new company before it ever gets o the ground..

As you evaluate possible business names, ask yourself:

t Does this name convey what my company does?t

Will this name appeal to my target customers?t Does this name re ect the brand image Im seeking to create?t Will the name carry my company through the years if I decide to expand or shift focus? (Planning ahead is why

Je Bezos called his company Amazon.com, and didnt include the word book in his company name.)

Once you have a name in mind, the next step is making sure no one else is already using it. Todays customers go onlinerst when looking for a businessand thats what you need to do, too. Ideally, you want to own your business name as

your domain name (or URL). Visit GoDaddy.com to see if your chosen business name has already been registered or if its available. If the domain name is not available, you may want to consider a di erent business name that is available.

After purchasing your URL, its time to register your business name with your state. Every state has its own set of procedures

to follow; visit your states Secretary of State website to learn more. You will probably need to le a DBA (Doing Business As)too. DBAs are used by sole proprietors and general partners who want to do business using a name other than the ownerspersonal name. Even if you plan to incorporate your business or form an LLC, most banks require a DBA in order to open abusiness bank account. The Company Corporation can help register your name in your state and complete DBA registra-tions for corporations, limited liability companies (LLCs), and some sole proprietorships and partnerships. Call our BusinessSpecialists at 1-800-209-0128 or visit us online at www.incorporate.com for assistance.

Registering your business in your state is not enough to protect your business name. You must also trademark yourname with the U.S. Patent and Trademark O ce before someone else does. If you dont and someone else trademarksor begins using the same business name, you could lose the rights to your name. That means youll have to change yourbusiness name and start all over with your branding process. The Company Corporation can also guide you through atrademark search. Simply call a Business Specialist at 1-800-209-0128 or visit us online at www.incorporate.com for help.
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The state where your business is physically located (or headquartered, if you will have locations in multiple states) is yourhome state. However, some business owners choose to form a corporation or LLC in a state other than their home state,such as Nevada or Delaware . You may want to incorporate outside your home state in order to enjoy lower corporate taxrates or a simpler incorporation process, for instance.

However, incorporating or forming your LLC in another state doesnt release you from meeting your tax and legal obliga-tions in the state in which you do business. To be sure you dont land in hot water, become familiar with your home statestax laws. Consult the Business Specialists at The Company Corporation for help; simply call 1-800-209-0128.

Once youve chosen the state where you will incorporate or form your LLC, here are some additional documents you mayneed:

Business License: Just about every business needs a city or county business license to conduct business legally. There mayalso be state or federal licensing requirements, depending on your type of business. Fees vary depending on your location,so check with your city or countys business license department to see what licenses are required. If youre running yourbusiness from home, you also need to make sure your neighborhood is zoned for a home business. Even if customers wontvisit your business and you use a post o ce box as your business address, youll need to register a street address and paythe licensing fees for that city.

State License: State licenses are usually required for personal or professional service businesses like accounting, contract-ing or cosmetology that have speci c industry standards. Depending on the nature of your business, you may need toregister with the state to collect and pay sales or use taxes. Check with your states Secretary of State website to see whatstate licenses your business needs. Federal License: Federal licenses are required for businesses that are highly regulated by the federal government, suchas ground transportation, preparing meat products, manufacturing alcohol or tobacco or providing investment advice.Contact your industry association or visit the Small Business Administration website at www.sba.gov for more informationon federal business licenses.

DBA: If youve chosen to have an alternate business name, called a Doing Business As (DBA), youll need to register the DBAwith your state and local government. You need to le the DBA so you can legally conduct business under a di erent namethan whats on your original incorporation documents.

Step 3: Choose the State Where You Will Incorporate or Form Your LLC
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Selecting the right legal structure from the beginning of your business can save you headaches and nancial hassles downthe road, so choose wisely. Both corporations and LLCs o er protection from personal liability in case of business bankruptcyor judgments against your company, but there are some signi cant di erences. Corporations and LLCs provide tax savingsas well. Consult with your tax adviser to determine how your tax liability may improve. Here are some key points to know.

A corporation must le articles of incorporation with the state. The owner and shareholders are not personally or nanciallyresponsible for the debts or responsibilities of the corporation. The shareholder is responsible only for his or her invest-ment; however, if there are any dividends, the shareholder may be taxed on pro ts received. The corporation pays taxes onits pro ts and can claim business losses on its tax returns. Corporations can take tax deductions for o ering bene ts suchas health insurance, life insurance and retirement plans, as well as for business travel and entertainment.

As a separate legal entity, the corporation will continue to exist even after the death of a shareholder or transfer of theshareholders shares. Because the corporation is a permanent structure, incorporating adds credibility to your new com-pany, especially when youre trying to woo investors or lenders. The corporate structure also protects any shareholdersfrom personal liability, which can make investing more attractive to them. A Limited Liability Company (LLC)must le similar articles of organization with the state, but o ers a more exible man-agement structure than does a corporation. Unlike a corporation, pro ts and losses pass through the LLC and are re-ported on each owners individual tax return. Since outside shareholders may not appreciate this taxation, especially if theyare not realizing any dividends from the business, the LLC is better suited to a business where all shareholders are activelyinvolved in operations. If there is only one owner, the companys income can be reported on the individuals Schedule C. If there is more than one owner, the individuals are treated as a partnership for tax purposes and le Form 1065.

Step 4: Decide What Type of Company to Form (LLC or Corporation)

Advantages of a Corporation

Disadvantages of a LLC Disadvantages of a Corporation

At a Glance: LLC vs. Corporation

No limit on the number of owners.

Pro t and loss are passed through to the ownersindividual tax returns.

No annual meeting or minute book requirements.

Cannot engage in corporate income splitting tolower tax liability.

Cannot issue stock.

May issue shares of stock to attract investors.

Corporate income splitting may help loweroverall tax liability.

Double taxation of corporate pro ts andshareholder dividends.

Must hold annual meetings and record minutes.

S Corporations have restrictions on numberof owners.

Advantages of a LLC
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After comparing business entity options, many business owners choose to form a limited liability company (LLC). Lika corporation, an LLC is a good way to wall o your personal assets from your companys liabilities, o ering protectionfor your personal assets in the event of a judgment against your business. For this reason, its a better t for many one- ortwo-person businesses than a sole proprietorship or a general partnership. In addition to the tax advantages mentioned earlier, an LLC also o ers more operating exibility than a corporation. In manystates, LLCs can be organized and operated however the business owners wish. You can decide which corporate character-istics you want, which tax structure you want to use, and which rules and regulations to follow in your business operations.

Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals,corporations, other LLCs and foreign entities. There is no residency requirement, so owners/members need not be U.S.citizens or permanent residents. There is no maximum number of members, and most states also permit single memberLLCs (those having only one owner). All of this can o er greater exibility if you are hoping to raise capital from investors.In addition, partners, suppliers and lenders tend to look more favorably on your business when youve formed an LLC.

Use the Business Startup Wizard or call the Business Specialists at The Company Corporation can help you determine if an LLC is right for you. Just call 1-800-209-0128 or visit www.incorporate.com .

Step 5: For LLCs Only

LLC Terms to Know

Articles of organization: Also known as articles of formation, this is the document you must lein many states to register a limited liability company (LLC).

Domestic limited liability company: A limited liability company organized under the laws of the state in which the LLC plans to conduct business. See foreign limited liability company .

Foreign limited liability company: A limited liability company organized under the laws of a stateother than the state where it plans to conduct business. See domestic limited liability company .

Member: The owner(s) of a LLC.

Operating agreement: The contract among the members of the LLC that guides the companysmembership, how the business is managed and operated, and how income is distributed.

Single member LLC: A LLC owned by one person or entity. The Internal Revenue Service treats asingle member LLC as a disregarded entity, meaning the entity does not le a return and all pro ts

and losses are reported on the LLC members return.
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C Corporation

The most common type of corporation in the U.S. is the C Corporation . By forming a C Corporation, business owners create aseparate legal entity that helps shield their personal assets from judgments against the company. The C Corporationstructure includes shareholders, directors and o cers. The advantages of a C Corporation include:

t Limited liability for directors, o cers, shareholders and employeest Perpetual existence, even if the owner leaves the companyt More credibility among suppliers and lenderst Unlimited growth potential through the sale of stock t No limit on the number of shareholders, although once the company has $10 million in assets and 500 shareholders,

it is required to register with the SEC under the Securities Exchange Actt Certain tax advantages, including tax-deductible business expenses

The C Corporation structure does have some drawbacks. For instance, a C Corporations pro ts are taxed when earned andtaxed again when distributed as shareholders dividends; this is known as double taxation. Shareholders in a C Corporationcant deduct any corporate losses. If you want those deductions, you may prefer to form an S Corporation instead.

S CorporationAn S corporation pays no federal income taxes; instead, the businesss income and losses are passed through to shareholders,who must then report the income and losses on their personal tax returns. This method is considered single taxation.

While it may sound smarter to form an S Corporation so you are taxed only once, S Corporation shareholders are taxedfor any income the company has, even if they did not receive a portion of that income. (A C Corporation shareholder, incontrast, is taxed only if dividends are issued.) Also, S Corporation o cers must be paid a reasonable salary even if thecompany is not making a pro t. An S Corporation may pay owner/employees dividends as well as a reasonable salarywhich may lower the owner/employees payroll taxes.

Not every business can register as an S corporation. Here are some requirements:

t The company must have a minimum of one shareholder and a maximum of 100 shareholders.t The company can have only one class of stock.t All shareholders must be U.S. citizens.t The company must incorporate as a regular corporation in its home state, then le IRS Form 2553 to choose

status as an S Corporation for federal tax purposes.

Step 6: For Corporations Only
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Need more help determining whether an S or C Corporation is right for you? Call a Business Specialist at 1-800-209-0128or visit www.incorporate.com .

Corporation Terms to Know

Articles of Incorporation: Also called the certi cate of incorporation or corporate charter, this isthe document you must le in many states to incorporate.

Bylaws: The rules adopted by the corporation that govern its actions and the rights and duties of corporate members and o cers.

Foreign corporation: A corporation that is formed in one state or country but does business inanother state or country.

Minutes: Corporate minutes are written records of actions taken or authorized by a corporationsshareholders or board of directors.

Shareholders: Shareholders (also known as stockholders) are the owners of a corporation basedon their holdings. They own an interest in the corporation rather than speci c corporate property.

Voting Rights: The shareholders rights to vote their shares, which are governed by laws as well asby the corporations bylaws and articles of incorporation.
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