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Incorporating Your Business Can Bring it to the Next Level

Research Options for Incorporation

Incorporating is essential if you want to start your own business because it provides legal separation between the person or people who own and operate the business and the company itself. This is done primarily for tax purposes, but also because businesses are subject to different laws than individuals and because incorporation plays a major role in your ability to secure credit and financing. If you are wondering how to incorporate, you should be aware that precise laws vary from state to state, but there are many commonalities in the procedure that you will have to follow to incorporate your business.

If you have been struggling with how to choose a career and keep finding yourself drawn to being your own boss, then starting an incorporated business may be right for you.

How to Incorporate a Business

The basic steps you will need to follow to incorporate your business are:

  1. Pick a name for your corporation and reserve it. You can do this online. If you do not have or want a specific name for your corporation, it will be assigned a reference number by the appropriate authorities.
  2. Define the type of corporation you are starting. If you are going to have unlimited shareholders, you will be running a so-called "C" corporation. If your shareholders will be limited to a select group of people, it will be an "S" corporation. You can also establish an LLC or limited liability company, or a professional corporation (used by doctors, lawyers, accountants and other specially licensed professionals to define a professional cooperative).
  3. Select a place to incorporate. In most cases, you will incorporate in the region in which the majority of your company's business will be conducted.
  4. Draw up a pre-incorporation agreement between all founding parties, defining the roles and entitlements of each individual.
  5. Fill out and file all necessary paperwork with the proper authorities in the region in which you decide to incorporate.

LLC Formation

If you are wondering how to form an LLC, know that the process is virtually identical but that an LLC differs from an incorporated company. In a corporation, the business' profits and losses belong to the company, not the people who run it. In an LLC, the business owners must claim profits or losses on their personal income tax returns.

In many places, it is possible to form an LLC or incorporate online, but if you choose to do this, you will be responsible for ensuring all the necessary forms and documents are filed before your business operations commence.