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| Incorporating Business | |||||
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There is no denying that Business incorporating
can bring with it a number of benefits to your company. If in case you
are seeking those benefits inherent in business incorporating, you will
want to go beyond the benefits to learn the process of business incorporating
along with the type of corporation you want. In simple terms, benefits
of incorporating business can
help you build a successful business.
Incorporating business may seem like a good thing when it comes to running your business, but do you know what type of corporation you want Fact of the matter is there are several types of corporations, and you should know what type of corporation you want for your business before you start the process of business incorporation. If you are considering business incorporation in that case you may want to consider filing for a C corporation. Theoretically speaking a C corporation will give you the benefits of business incorporation, but filing for a subchapter S corporation will allow you to treat the earnings as distributions passed through directly to the personal tax return. On the other hand business incorporation with an S corporation subchapter does mean that you will need to meet the standards of reasonable compensation. Furthermore another type of corporation
to consider when you are thinking about business incorporation is the
Limited Liability Company. It is worth mentioning in this regard that
this type of corporation is designed to combine the limitations of corporate
liability with the tax efficiency and flexibility of a partnership. Though,
if you are considering business incorporation under a Limited Liability
Company, you will find that incorporating
business will be more complex that forming a business as a partnership.
Once you decide what type of corporation
you desire, you will need to file the proper documentation for business
incorporation. Fact of the matter is in most states the process of business
incorporation starts with reserving a name. In addition the business incorporation
will usually then requires you to fill out your articles of incorporation
and other tax forms. It is advisable that you should check with your states
Secretary of State or Corporation Commission for the specific paperwork
required for business incorporation in your area.
Business incorporation also allows
you to have a broad range of powers. According to experts, this means
that, as a corporation, your business can enter into contracts, buy and
sell property, and even sue and be sued. In case if your corporation does
end up in small claims court, you can send any officer or director to
appear on behalf of your corporation. Furthermore, business incorporation
means that your corporation does not rely on the death or incapacity of
any shareholders or officers to continue operating.
If the report of US Bureau of Census
is taken into account, 550,000 new businesses were formed in 2005. But
fact remained that it is not known how many were incorporated. Furthermore
there were approximately 22.9 million businesses in the US. In simple
terms, these are small businesses that form the backbone of the American
economy. It is worth mentioning in this regard that small businesses represent
99.7% of all employers and create more than 50% of non-farm private gross
domestic product.
There is no denying that most businesses
start out small. As a matter of fact in the beginning, data reveals that
82% of the small businesses are financed by personal loans or savings
and loans from friends and relatives. Thats why, when these firms grow
large, it is important that easier access to finance from banks and the
public is available. Furthermore, the owners liabilities have to be reduced
to decrease personal and business risk.
A checklist for starting a business
runs like this: select a business structure, choose a tax year, and select
accounting method and payment of business taxes. Always keep in mind that
the need for incorporation arises if the business structure chosen is
either a LLC or corporation. It is worth mentioning in this regard that
either of these requires mandatory filing with state authorities. In case
if it is sole proprietorship and partnership, registration is not required,
and business activities may begin immediately. On the other hand in the
cases of LLC and corporation, a lot of legal counsel, understanding the
filing procedure, tax compliances, formation of business structure as
per the type of corporation and the role of management and members are
required.
Theoretically speaking the actual
filing procedure is filling out proper forms and handing them over to
state authorities where incorporation is done. In an ideal scenario filing
the papers can be done by hiring the services of an incorporating agency.
Fact remained that these agencies file the papers in all the states required
and provide some value added services including information of fees and
duration calendars that vary from state to state. It is worth pointing
that states like Nevada and Delaware are corporate friendly; therefore,
most firms incorporate in either of these states.
It is worth pointing that the procedure
to incorporating business requires
certain steps. One has to decide the type of corporation, name of the
corporation, state of incorporation and the filing of the papers.
As there is no denying that the corporation
is a separate legal entity, the identification has to be unique. Furthermore
it is essential to check with the authorities as to whether the name for
the business already exists. In case if it exists, some other name has
to be chosen. Moreover some names can be appended with the name of the
business like XYZ bank. In theory the type of corporation is decided by
determining whether or not one has to raise capital through the public,
the duration of the corporation, the management structure and control
and the type of corporation like LLC or corporation.
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