How to Incorporate:
Follow our step-by-step guide if you would like to incorporate your business.
Decide if incorporating is the right choice.
Evaluate the pros and cons of incorporating.
The first step is to carefully consider the benefits and drawbacks of incorporating and to evaluate whether this is the right move for your business.
- Personal asset protection.
- Adds business credibility.
- Affords name protection.
- Perpetual existence.
- Easier to raise capital.
- Easy to transfer ownership.
- Double taxation.
- Time-consuming formalities.
- Regular filings and annual fees.
- Additional paperwork.
- Shared ownership.
- More difficult to dissolve.
Seek professional advice.
Consult with your accountant and lawyer to gain a better understanding of the financial and legal implications of incorporating.
Decide which state(s) to incorporate in.
Incorporate in the state where your business is located.
Deciding to incorporate in the state of your primary business is the least complicated option. Incorporating in your home state is sensible for businesses only operating in that state since, regardless of the state of incorporation, the business must still be registered and pay fees and taxes in every state in which it operates.
Research your options for incorporating out-of-state.
Incorporating out-of-state may be financially advantageous. If you have or intend to have active business locations in several states, it is worth researching the tax regulations, costs of incorporation, and out-of-state qualifications in each state to determine whether it might be more cost-efficient to incorporate out-of-state.
Find a business name.
Research the rules for business names in your state.
To ensure compliance you should familiarize yourself with the state's naming rules. Keep in mind that usually the name must be unique and end with a designator such as Inc., Co., or Corp.
Create a list of potential names.
Take keywords from your market research and brainstorm name ideas.
Use a business name generator to create name ideas.
Ask potential clients for their opinion.
Find out what your target market thinks of your business name ideas by posting online surveys or approaching them in person.
Trademark your business name.
Once you have decided on a name, you should trademark it to ensure that no other business uses it. You can search the USPTO trademark database to see if your name idea is available.
Form your business.
Decide on the type of corporation.
The two main types of corporations are C and S corporations. The main differences between the two are how they are taxed, the number of shareholders they can have, and how much stock can be issued.
A C corporation is good for fast-growing businesses that eventually want to go public. This type of corporation is subject to corporate taxes but is not limited in the number of shareholders and class of stock that can be issued.
An S corporation is essentially a C corporation that qualifies for pass-through taxation. After incorporating, a business is automatically a C corporation. To become an S corporation, the business must apply for S corporation status. The requirements to qualify as an S corporation include the following:
- The business must be based in the U.S. and filed as a U.S. corporation.
- The number of shareholders is limited to 100.
- Shareholders must be U.S. citizens or residents.
- Only one class of stock can be issued.
File Form 2553 with the IRS should you want to apply for S corporation status.
Appoint a registered agent.
Most U.S. states require businesses to appoint a registered agent. A registered agent is a corporation's official contact for communicating with the state. Corporations can appoint an individual or another company to act as their registered agent.
Prepare and file articles of incorporation.
The articles of incorporation refer to the legal document businesses are required to complete and file with their secretary of state office to create a corporation. Filing fees vary by state.
Articles of incorporation typically include the following:
- Name of the corporation.
- Purpose of the corporation.
- Name and address of the appointed registered agent.
- Type of corporation.
- Duration of the corporation.
- Names and addresses of the initial board of directors.
- Name and signature of the incorporator.
Create corporate bylaws.
Draw up a set of bylaws.
Corporate bylaws are the rules that outline how business operations are to be run and what procedures must be followed. It usually contains provisions regarding the way the corporation is to conduct business and defines the powers, duties, and responsibilities of the board of directors, officers, and employees.
Corporations are required to draw up a set of bylaws to guide operations and ensure that all business activities and decisions are recorded for future reference.
Corporate bylaws are the rules of a corporation and generally include the following:
- The corporation's identifying information.
- Stock classes and type of shares the corporation issues.
- The composition, powers, and duties of the board of directors, corporate officers, and committees.
- Procedures and intervals for holding various types of meetings.
- Shareholder voting rights.
- Procedure for making amendments to the corporation's bylaws and Articles of Incorporation.
- Corporate record-keeping procedures.
- A Conflict of Interest Policy.
Start a corporate records book.
Corporations are required to maintain a corporate records book. This is where the corporation's essential documents and records that track operations and major decisions are kept.
A corporate records book contains an organization's essential documents and records such as:
- Articles of Corporation.
- Corporate bylaws.
- Meeting minutes.
- Stock certificates.
Hold the first board meeting.
The incorporator is responsible for organizing the very first board meeting of a new corporation in which the initial board of directors officially adopts the corporate bylaws, elects a permanent board of directors, issues stocks, and makes other pertinent resolutions.
Apply for necessary permits and licenses.
Check your state requirements.
Navigate to your secretary of state website to find out if there are state-specific permits and licenses that you need to apply for.
Get an Employer Identification Number (EIN).
Businesses need an EIN for tax purposes if they plan to hire employees.
File a Doing Business As (DBA).
File a DBA if you intend on using a variation of the official business name.
Guides to Starting a Business by State:
How can I make myself incorporated?
How much does it cost to incorporate?
The fees for filing articles of incorporation vary by state but generally lie between $250.00 and $500.00. Contact your local secretary of state office for more information about the fees applicable in your state.
How long does it take to incorporate?
This can vary according to the state. In some states, it takes three or more weeks to incorporate. Incorporating online tends to be the fastest way to establish a corporation, often only taking between one and three days.
How is a company incorporated?
A company can be incorporated by filing articles of incorporation with the secretary of state. However, before this can be done you should have selected a name for the business, completed a business name search, and appointed a registered agent.
How long does it take to incorporate in Canada?
Incorporating in Canada can take as little as one to two days.
Why would someone incorporate themselves?
There are several benefits to incorporating a sole proprietorship, such as to protect personal assets, add credibility to the business, and to attract investors.
What's better, an LLC or corporation?
Corporations and LLCs both limit the owners' liability but they are owned, managed, and taxed differently. Each business type offers its own set of advantages and disadvantages that must be considered before deciding which is better for your business.
How do I incorporate online?
Look up your state office for incorporation, which is usually the secretary of state, and search for a link to start the registration process. You will first have to make all the necessary preparations, such as selecting a business name, conducting a business name search, and appointing a registered agent, before you can complete the articles of incorporation with all the necessary information.
What are the benefits of incorporating yourself?
There are several advantages to incorporating a sole proprietorship, such as to protect personal assets, add credibility to the business, and to attract investors.
Can I start a corporation with one person?
Yes, a corporation can have only one owner or shareholder.
How much does it cost to incorporate in Canada?
The service fees for incorporating in Canada are $200.00 for filing online and $250.00 for filing by paper.
Can you incorporate a sole proprietorship?
Yes, you can incorporate a sole proprietorship.
What is the difference between LLC and S Corp?
LLCs and S corps both offer limited liability protection and qualify for pass-through taxation. And while LLCs can have any number of members, S corps are restricted to 100 shareholders who must be U.S. citizens or residents. An advantage of an S corp is that stock is freely transferable, which is not the case with an LLC.
Which state is cheapest to incorporate in?
Arkansas, Colorado, Hawaii, and Iowa have among the lowest filing fees for forming a corporation.
What is the best way to incorporate a small business?
The easiest way to incorporate a business is through an online incorporation service such as Incfile.
How much does it cost to start an S corporation?
To establish an S corporation you will first have to form a C corporation for which the filing fees vary by state, in the general range of $50.00 to $250.00, and then apply for S corporation status with the IRS.
How much does it cost to incorporate in PA?
Filing Articles of Incorporation in Pennsylvania costs $125.00.
How much does it cost to incorporate in Delaware?
Filing articles of incorporation in Delaware costs a minimum of $89.00.
How do I file articles of incorporation?
In most states, you have to file articles of incorporation accompanied by a fee with the secretary of state. This can usually be done by paper or online. Do an online search to find out where and how to incorporate in your state.
What is the difference between LLC and INC?
The main difference between the two is that corporations have shareholders, issue share of stock which allows for an easier way to raise capital, and are subject to corporate tax. LLCs, on the other hand, are owned by individuals and do not allow for the free transfer of ownership but do qualify for pass-through taxation.
What does it mean to be incorporated?
Incorporating a business means to create a legal business structure that is separate from its owners or shareholders.
How do I change from C Corp to S Corp?
Once you have established a C corporation you will have to file Form 2553 with the IRS to apply for S corporation status.
How much does it cost to incorporate a nonprofit?
The cost of incorporating a nonprofit varies by state. State filing fees generally range from $50.00 to $250.00.
How long does it take to file an S Corp?
The processing time for incorporating a business generally takes 3 to 6 weeks, although incorporating online can be significantly faster. After incorporating your business you will have to apply for S corporation status with the IRS. You can expect to wait up to 60 days to receive your S corporation application determination from the IRS.
Should I incorporate my small business?
The decision to incorporate should not be made lightly. There are several advantages as well as disadvantages to incorporating a small business instead of forming an LLC or remaining a sole proprietorship or partnership. If your small business is growing rapidly and you intend to go public at some point, incorporating may be a good decision.
What is the difference between corporation and incorporated?
There is no difference in the legal structure of businesses that are defined as a corporation or incorporated.
When should you incorporate a startup?
It is generally advisable for a startup to incorporate or form an LLC early on. However, this may also depend on the type of ownership, size, and projected growth rate of the business. Familiarize yourself with the benefits and drawbacks of the different types of legal business structures to gain a better understanding of which structure is the best choice for your business.
Can an incorporator be a director?
Yes, an incorporator can also serve as a director.
How much does it cost to incorporate in Tennessee?
Filing articles of incorporation in Tennessee costs a minimum of $100.00.