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Incorporating your business has never been easier. However, there are still some important
decisions to make, and I want to talk about the five most important things you need to
do for a do-it-yourself incorporation. First, you need to ask yourself if it’s
worth it. In most cases, incorporation is worth the effort, as it protects your personal
assets and removes some of the personal tax burden. However, incorporation does require
significant amounts of time and focus, and you don’t want to start the process only
to quit midway through, losing the money you’ve already spent.
Second, determine what state you want to incorporate in. One of the great things about incorporation
is you don’t have to live in the state you incorporate in. The separate entity created
by incorporation can live where you want it to. As a result, some states, most notably
Delaware and Nevada, offer many incentives to incorporate there, such as tax breaks and
resources. You need to investigate whether the benefits of registering in another state
outweigh the various fees for incorporating outside your home state.
Third, decide what kind of corporation you want. There are many choices, from Professional
Corporations to Non-Profit Corporations, C-Corporations to S-Corporations, each with their own pros
and cons. Depending on what kind of business you run, the choice might be obvious, or it
might not. Fourth, apply for an Employer Identification
Number, or EIN. This number is assigned by the IRS to keep track of business entities.
With a sole proprietorship, your Social Security Number is enough, but a corporation needs
an EIN to open bank accounts, hire employees, and operate as a corporation.
Finally, and most importantly, do your research. The Internet is a powerful tool, with answers
to many specific questions, simply by using Google or looking at state websites. It might
be helpful to contact an expert. By paying an advising fee now, you can avoid many headaches
down the road.