How to incorporate your small business

When opening a small business one decision that you will need to make is whether you should incorporate your small business. The good news is that this decision does not need to be made right away, you can always decide to incorporate your small business later on. Even if you decide to incorporate your small business at a later date, you will want to talk to your lawyer and your accountant to determine if incorporating your small business would be the best choice.

If you decide that incorporating your business is the right choice here are the steps that you will need to take to incorporate your small business.

Step one:
The first thing that you will need to decide is what type of corporation you are going to form. When incorporating your business you have three types of corporations that you can choose from. Your first choice is a limited liability company, which is a hybrid business entity. The LLC mixes the characteristics of the partnership and the corporation to form an LLC. An LLC has the protection of a partnership, but it is taxed the same way a partnership is. Your second choice is a C-Corporation, which can be created by one or more shareholders. The C-Corporation is a general corporation, it is its own legal entity, and therefore your personal assets are protected during litigation because business assets will go first. Corporations pay taxes on its revenue and shareholders pay taxes on their earnings. Your third choice is forming an S-Corporation, which the biggest difference here is that your corporation will not have to pay federal taxes, the S-Corporation is taxed in a similar method as a partnership.

Step two:
Choose a name for your business. When selecting a name for your business you will want to choose a name that is not already in use by other business, but you also need to choose a name that is different from other business's in your industry. The ending of your business name will need to be in conjunction with the type of corporation you form. For example, if you elect to form an LLC you will need to end your business name with Limited Liability Company or the abbreviation LLC.

Step three:
Once you have decided on the type of corporation that you want for your business you will need to fill out the correct paperwork. If you are going to incorporate your small business as a LLC, you will need to fill out the Articles of Organization. If you elect to form a C-Corporation, you will need to begin filling out the Articles of Incorporation. The S-Corporation requires you to fill out the Articles of Incorporation as well because before you can form an S-Corporation you have to be registered as a C-Corporation, so you must follow the steps required for forming a C-Corporation. You can obtain copies of the Articles of Organization and Articles of Incorporation from the Secretary of State's office or you can download a copy from the internet.

Step four:
Once you have filled out the Articles of organization or the Articles of Incorporation you will need to file them with the Secretary of State's office for the state that you are incorporating in. When you file the papers, you will also need to pay the filing fee that is associated with the business entity, which is typically a few hundred dollars, but can be as low as $80. You will also need to pay any annual corporate taxes that are due at the time of filing. For example, CA charges an $800 annual corporate tax, which must be paid every year including the first year that you file.

Step five:
Make sure that you obtain any permits and licenses that your business will need. This will vary based on what type of business you are opening and where you are doing business.