Starting a business in the United States can be a long and complicated process. Knowing when and how to incorporate, what the associated costs are, and how to handle taxes and contact customers can be overwhelming. To help business owners make the best choices, we have put together a comprehensive guide to frequently asked questions related to incorporation for businesses in the US.

Incorporating a business is an important decision that will have long-term impacts. It is essential that business owners are familiar with the process and understand all the associated costs. Taking the time to research the available options and consulting with professionals who understand the local regulations is critical.

For the potential business owner in the US, this guide will address questions about the different forms of incorporation available, the associated costs, and how to handle taxes and contact customers.

To begin, let’s look at the different types of incorporation offered in different states.

What Are the Different Forms of Incorporation?

Business owners in the US are able to choose the type of business entity that best suits their needs. The most common types of incorporation are: Sole Proprietorship, Limited Liability Company (LLC), Corporation, Professional Corporation (PC), S Corporation, and Nonprofits.

A sole proprietorship is a business owned by one person, and is the easiest and least expensive form of business. This type of business structure has no separation between the business and its owner, so the owner is personally liable for all debts and obligations.

An LLC is a business structure that combines the legal protections of a corporation with the tax and economic benefits of a partnership. An LLC consists of one or more members and has limited personal liability for the debts and obligations of the business.

A corporation is a separate legal entity owned by its stockholders. Shareholders are not responsible for the corporation’s debts and obligations, and the corporation is responsible for its own. Corporations can issue stock, shares, and other ownership rights to shareholders.

A professional corporation (PC) is a structure for businesses that provide professional services. These include services that require a professional license or credential such as accounting, law, engineering, and other disciplines.

An S corporation is another type of incorporated business structure in which income and losses for the business flow through the shareholders, rather than the corporation itself. This type of business structure is often used by smaller businesses to avoid double taxation.

Finally, a non-profit organization is a type of organization that is not able to distribute profits to its owners or shareholders and is typically organized to pursue a charitable or public mission. Non-profits are tax-exempt and must comply with regulations regarding financial structure and reporting.

What Are the Costs Associated with Incorporation?

The cost of incorporation varies depending on the type of business entity chosen and the state in which the business is being formed.

Incorporating as a sole proprietorship or LLC usually requires the filing of paperwork with the state, plus any applicable fees. The cost of filing the paperwork will depend on the state and typically ranges from $50 to $500. Filing as a corporation or PC will usually require additional filings and fees, depending on the state. It’s important to understand the requirements for filing and fees for the state in which the business is being established.

In addition to filing fees, incorporating may require attorneys’ fees and other professional services. Hiring a professional attorney experienced in local regulations can help business owners to make sure the paperwork is filed correctly and efficiently.

How Do Taxes and Other Obligations Differ When Incorporating?

The main difference between sole proprietorships or LLCs and corporations or PCs is that corporations and PCs are separate legal entities from the owners, and therefore are subject to different tax obligations. In general, corporations and PCs are taxed twice—once for the corporation or PC, and once for the owners. Conversely, sole proprietors or LLCs are generally only taxed once, on the business’ profits.

In addition to different tax obligations, incorporated entities are also subject to different liabilities and regulatory obligations than those of sole proprietorships or LLCs. Business owners should consult with professionals to determine the best type of business entity for their individual needs.

How Can I Contact and Serve Customers?

Once the business is incorporated, it’s important to understand how to contact and serve customers. Depending on the nature of the business, there are several ways to reach potential and existing customers.

Most states require businesses to register with the state tax authorities and to obtain an employer identification number (EIN). This number is used to open a business bank account, which is necessary to receive payments from customers. Additionally, the business must obtain a license in order to conduct business operations in the state.

In addition to obtaining the necessary paperwork, businesses should consider opting for the necessary insurance to protect themselves from liabilities. Business owners should consider what types of insurance are needed, such as general liability, property, and workers’ compensation.

Finally, advertising is a crucial tool for reaching customers. Businesses should consider investing in online and traditional media advertisements, such as billboards, radio, and television ads. Social media is also an effective way to reach potential customers. Business owners should develop a comprehensive marketing strategy and consult with professionals to help develop and execute the plan.

Final considerations

Incorporation is a complex process with many decisions to make and important obligations to consider. Taking the time to research and understand the different types of business entities and associated costs, taxes, and regulations is essential.

As business owners research the various forms of incorporation, it’s important to remember that each state is different, and it is essential to consult with professionals that understand the local regulations. Taking the time to do research and consult with professionals can help business owners make the best possible decision for their business.


Advantages of Incorporation,

Types of Incorporation,

Cost of Incorporation