Using incorporation services can save you time since there are many ways of forming a business. A wholly-owned small company is known as a sole proprietorship. A general partnership is a simple business structure with two or more people who own a business together. Another way of forming a business is to start a limited liability company (LLC), and lastly, you can develop a corporation.
The standard corporations are C corporations (C corp) or S corporations (S corp). C corps offer the most substantial protection for their shareholders or owners because they are separate legal entities. They can make a profit or loss, be taxed, and be held legally liable. An S corp avoids the double taxation drawback of a regular C corp. S corp allows profits, and some losses, to be passed directly to the owner without being subject to corporate tax rates.
Corporations are a good choice for medium or higher-risk businesses, those that need to raise money, and businesses that plan to go public one day or eventually sell. Before deciding on your business structure, it is advisable to determine which option best suits you and your business goals.
The Internal Revenue Service estimates that there are more than 5 Million S corps operating in the U.S.in 2021 and 15 Million C corps.
Editorial Note: We earn a commission from partner links on Startup Honcho. Commissions do not affect our editors’ opinions or evaluations.
What Is Incorporation?
Many people dream of owning their business but are fearful of risking everything in the process. One way to limit personal liability is by incorporating your business.
Incorporation is a formal legal process of starting and organizing a corporate entity or company. There are a set of documents that establish the corporation’s existence.
The articles of incorporation are public records designed to provide relevant information about your corporation. These include the business name, address, contact information, details about the business’s stock, and particulars about shareholders. The incorporation service files the articles with the secretary of state or the registered agency. The registered agency receives and handles all the business documents and files them safely.
Incorporation requires more administration and expense than a sole proprietorship or a partnership. It offers important financial, legal, and tax advantages. The business incorporation service is drawn up and supplied by a registered agent service. These legal documents ensure that owners and shareholders are not liable for the business’s debts.
If you have an S corp or a C corp, you can earn the word Inc. at the end of the company name. C corp is the most common Inc. business structure.
Why Should You Incorporate?
Benefit Of Limited Liability
When a registered agent service has filed your articles of incorporation, the business becomes a separate entity. The most significant benefit to incorporating a company is its limited liability protection, which means that the shareholders can conduct business without risking their homes, cars, or savings. Owners of a sole proprietorship or partnership face unlimited liability for business and personal assets, whereas LLCs provide the same limited liability protection as corporations.
Business Expense Deductions
Another great benefit to incorporation services is deducting additional business expenses. Business expenses such as office rent, salaries, health benefits, legal and accounting services, office equipment, supplies, and utilities are considered basic business expenses and are generally tax-deductible.
Easier Access To Capital
Starting a business often means that you need a bank loan. Banks are pretty accommodating when it comes to lending money to corporations. If you need to raise some capital, it is easier to do this as a corporation by issuing shares. Corporations generally have easier access to capital, making them more financially liquid and easier to grow and develop.
Pay Less Tax
When choosing which business structure is suitable for you — consider the taxation. For example, some business structures have a pass-through taxation process where the business does not pay tax. Instead, a designated person pays the business’s taxes using their tax return.
Sole proprietorships, partnerships, and S corps can apply for pass-through taxation to prove that the company deserves pass-through status. C corps pay a flat corporate tax of 21% on the company’s earnings. Shareholders report profits and losses on their tax returns.
Enduring Business Structures
Corporations can continue with different directors, officers, managers, or shareholders for long periods. The advantage of this is that the operating agreement stays the same even if directors change. When you use an incorporation service, you may be able to avoid getting embroiled in legal arguments and expensive legal services. A registered incorporation service can extend the corporation’s life beyond its founders.
Boosts Credibility
The word Inc. at the end of a company or corporation name signifies that the business is separate from its owners. Incorporation has some status and credibility and is perceived as being stable. An incorporation service implies that the business partners are committed to the business venture.
Stay Anonymous
A corporation offers anonymity to its shareholders. If you want to open a small business and don’t want your involvement to be made public, your best choice is to incorporate.
The Steps Towards Incorporation
The first step towards acquiring incorporation services is to find the best online incorporation service to do the paperwork for you. In-person incorporation services are also available. All you have to do is decide how to register and incorporate your company and share some vital information with your incorporation service. An online incorporation service will do the rest. Incorporating your business online is straightforward and seamless if you do it through a reputable online incorporation service. The articles of incorporation vary from state to state in the U.S., but the following information is typically needed:
Name Of The Business
The articles of incorporation need a unique company name. Most states require that Inc. goes after the business name.
Business Address
This address must be a street address and not a post office box. It is your brick-and-mortar place of business.
Business Description
Most states accept a general description of the core business of the company. The definition does not have to be specific. Review each state’s requirements before you complete this section.
Name And Address Of The Registered Agent Services
All registered business entities must select a registered agent. A registered agent service specializes in helping you keep your business on the right side of the state business entity requirements. They are your business’s agents, and one of the stipulations is that they are constantly available at a fixed address. You must supply this address when collecting the necessary documents for incorporation services.
Type Of Corporate Structure
You are required to list the type of corporate structure you are incorporating and your incorporation service. If you are using an online incorporation service, you must give the company’s name. Most states require the incorporation service name, address, and signature.
Names And Addresses Of The Directors
Some states require the names and addresses of directors and other corporation members.
Number And Type Of Authorized Shares
Authorized shares or authorized stock refers to the maximum number of shares that a company can legally issue to investors. The company’s articles of incorporation issue the number of authorized shares. When collecting documents for incorporation, the incorporation service company must know these details.
- The type of share.
- The number of shares issued.
- The value of each share.
- The allocation of shares.
Start Date Of The Corporation
Some states allow you to choose the start date of when your company will begin to do business. Other states assign a date after they have processed your articles of incorporation. If you don’t intend for the company to exist perpetually, you can add an end date.
The Incorporation Services Details
The registration agent service’s name, signature, address, and incorporation services are required.
Best Incorporation Services
An independent survey reviewed and ranked the five best online incorporation services in 2021. The survey aimed to connect small businesses with the best online incorporation services. The review looked at the type of business, the needs of the company, and desired additional services.
Zenbusiness came out on top for best overall service provider for LLC, corporation, and S corporation formation. Northwest Registered Agent came second as an excellent all-around provider for LLC formation. Incfile came in third for best nonprofit formation.
Rocket Lawyer was fourth for best ongoing legal services packages. LegalZoom was fifth for the most recognized formation service.
ZenBusiness was the top choice for incorporation. It has superior LLC formation services and S corp formation services and combines stellar customer support, competitive pricing, and business advice delivered straight.
Rocket Lawyer has on-call attorneys, discounts on other legal services, free phone consultations, and review documents.
Another independent survey looked at the best online incorporation services.
Zenbusiness was the best online incorporation service. It has a wide range of business formation packages, excellent customer service, and a quick turnaround time. The LLC formation service and C corp business formation service were unchallenged. Incfile came in second for incorporation services. LegalZoom came in third for best legal services.
BizFilings came in fourth for best for C Corp online incorporation services. Inc Authority was best for bypassing Fees.
$49 + State Fees
Varies By State & Package
$39 + State Fees
Varies By State & Package
$0 + State Fees
Varies By State & Package
Conclusion
Incorporation is the way that a business is officially started and formally organized. The process of incorporation involves completing documents known as the articles of incorporation. The articles of incorporation give personal details about the firm’s shareholders.
In a corporation, the movement of cash in and out of business and the assets are kept separate from shareholders and investors. So shareholders invest knowing they have limited liability.
Incorporating your business is one of the best ways of protecting your assets. A corporation can own property, proceed with business, suffer and survive legal issues, change directors, pay less tax and go to court without losing everything. In effect, incorporating your company means that it will either stand the test of time, or if it does not succeed, the shareholders will not have lost everything. It is a business structure where business owners can grow and develop their business fearless of risk.
Set Up Your Business in 10 Minutes or Less
