Frequently Asked Questions on Business Incorporation
The next logical step for many thriving small businesses is to expand and incorporate. Many business people, however, may not be familiar with the process of business incorporation. You may not be aware of the requirements, the process, and differences among the several types of business entities. MyCorporation, one of the most trusted document filing services in the US, offers answers to some of the most frequently asked questions about business incorporations.
What is Business Incorporation?
Business incorporation involves different options available to you in determining the proper structure for your business.
partnership, limited liability company (LLC), non-profit, cooperative, and various forms of corporation. The business structure you choose need not be fixed, and can be changed as your business grows.
What are the Benefits of Incorporation?
Incorporating business personal protection,
since the incorporated company
entirely separate legal entity from you. Your personal
company’s assets, too. Creditors cannot go after your personal assets for your business debts and obligations. There are also tax benefits in incorporating your business. A California limited liability company, for example, depending on the number of members or shareholders, can be taxed as a sole proprietorship or as a partnership. IRS rules now allow LLCs to choose between being taxed as a partnership or as a corporation. This is one area that you need to discuss with an accountant, as tax laws vary per state. Incorporating can give a great sense of credibility to your business. Suffixes such as “Inc”, “LLC”, or “Corp” already add volumes to a company’s credibility. You can raise your capital easily with the sale of stock and securities if your business is incorporated. And your corporation can even last for an indefinite time and outlive you, depending on how well it will be managed and how good it will perform.
What is the Best Option for Small Businesses, an LLC or an S Corporation? LLCs and S Corporations are two popular forms of business structures, as both offer liability protection and pass-through income tax treatment for the owners. That is, taxes are reported on your personal income tax return, and not on the company’s. Typically, it’s always up to you to decide, but it’s good to take into account the tax filings, the employment tax you may be required to pay, and state tax laws. Because the needs of every business are not similar, and applicable laws differ by state, it's worth an hour or two to consult a knowledgeable attorney or professional document filing services to go over relevant matters that will influence your decision.