How to Incorporate a Small Business

If you’re thinking of incorporating a small business, you may feel like the process of incorporation is an impossible task. That’s not so. Learning how to incorporate a small business is easier than you imagine.

The advantages to incorporating a small business are legion: tax incentives, liability limitations and income control are just the biggest reasons why you may want to incorporate.

Starting a Small Business

You should understand before starting a small business and incorporating that, though many people will tell you to incorporate in a handful of states for the tax breaks, it usually makes the most sense to just stay where you are and incorporate at home.

People are falling over themselves to incorporate in Delaware or Nevada, for tax purposes. Businesses forming an out-of-state corporation usually will end up having to go through a process to “qualify” to do any business in the state where your business is.

That lengthy and potentially expensive process could easily outweigh the benefits of out of state incorporation.

Corporate Stock and Small Businesses

Incorporating a small business is easy if you plan on using family members and close friends to own all stock. That is, if you’re doing as most people do and avoid offering any stock in your business to the general public. It is so easy to incorporate, that all the necessary legal documents can be written up in a matter of a couple of hours.

These documents are things like the “Articles of Incorporation” and your “Corporate Bylaws”. Thus, the first step in the incorporation process is to figure out your state’s requirements.

How do you do that?

How to Incorporate a Small Business

How to Incorporate a Small Business

Find your state’s corporate filing office and look through the federal and state trademark registers to be sure the name of your business isn’t already in use. Most state’s corporate filing office is part of that state’s Secretary of State offices or the Corporations Commissioner’s office.

Filling Out Forms

There will be plenty of forms to fill out during this process. Start out with a pre-printed incorporation form that asks you to list the purpose behind your new corporation, as well as the corporation’s principal place of business and the number and type of shares of stock that will exist. State incorporation forms are available through your state’s corporate office or online through commercial services.

Filing Incorporation Forms

You’ll eventually need to file all these documents with the right state office. There’s going to be a fee for that process, too. In some states, that fee can be quite hefty, reaching as high as $1,000, depending on which state you incorporate in.

If you’re like most small businesses and won’t be dealing with public offerings of stock, conducting your corporate business is not complicated. Most of the time, all you have to do is record any big corporate decisions, like buying real estate or taking out a loan.

Otherwise, you’ll need to hold some sort of annual meeting of the corporation to report. As a matter of fact, you can skip these formalities via a written agreement between members of the corporation. You may never have to have a single meeting.

Incorporating Your Small Business

It is easy to incorporate your small business. If you feel that the benefits of small business incorporation are worth it, you may be surprised at how quickly you’re done with the task.

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