Key Takeaways

  • Incorporating yourself separates your personal and business liabilities, protecting your assets.
  • It enhances credibility and access to funding through stock issuance and loans.
  • Tax advantages differ between S corps and C corps—choosing wisely can save money.
  • Additional benefits include audit protection, perpetual existence, and lower insurance costs.
  • Steps to incorporate include choosing a structure, naming the business, filing formation documents, and maintaining compliance through ongoing requirements.

The benefits of incorporating yourself include giving you increased protection over your personal assets, easier access to capital, giving your business more credibility, more anonymity, tax advantages, existing into perpetuity, access to more affordable health insurance, and having a lower risk of being audited after incorporation.

Personal Asset Protection

Setting up as a corporation is considered one of the most ideal ways to protect personal assets. The corporation becomes a separate entity and holds responsibility for the debts it incurs. Corporations have the ability to own property, engage in business activities, and can both sue and be sued. A corporation's creditors typically have the right to pursue payment from the corporation's assets, while protecting the assets that are personally held by:

  • Directors
  • Officers
  • Shareholders

This level of protection lets the corporation's owners do business with no risk of losing personal property like:

  • Their homes
  • Their vehicles
  • Personal savings
  • Other types of personal property

This differs from the experience of sole proprietors and business partners who are exposed to the risk of unlimited liability on both the personal assets they possess and the business assets involved.

Ease of Accessing Capital

Corporations are able to issue stock shares to raise capital, which makes it easier for corporations to raise capital. This gives the business the chance to grow more quickly. In many cases, incorporating also makes it easier to get a bank loan. As a rule, a lender prefers to issue loans and other forms of credit to corporations over making loans to unincorporated business endeavors. A wider variety of alternative funding sources are available to corporations, making it easier for them to pay off debt.

A More Credible Business

Forming a corporation provides benefits that go beyond the financial arena. Entities dealing with corporations often view them as more reliable and stable than business entities that haven't been incorporated. The Inc. designation and the title Corp. after the name of a company suggests to outsiders that the business is a permanent fixture that has earned credibility and is a stable part of the community. The Inc. and Corp. designations also show that you're committed to the continued success of your business endeavor.

The Advantage of Anonymity In Business

Business owners who incorporate get a level of anonymity from the corporation. For example, if you want to be part of a business without others in the community being aware of your involvement with it, incorporating can give you some separation from the business.

Tax Advantages From Incorporating

There are several tax advantages when forming a corporation, but it's advisable to speak with a tax professional to make sure what advantages you'll see before forming a corporation.

  • S-corporations have fewer than 100 shareholders and owners pay income tax based on the owner's share of the entity's corporation income at the owner's personal taxation rate. Business losses in a corporation can be used to offset other income. The S-corporation as an entity usually doesn't have to pay any income taxes.
  • C-corporations pay a flat tax rate of 35-percent, putting an increased focus on using caution when selecting the type of corporation formed.
  • Small business retirement plans can create a way for a bigger percentage of the corporation's income to be deferred at tax time. This provides the opportunity to build a bigger retirement fund through larger contributions, and that means less of the corporation's income is taxable.

A Corporation Exists Into Perpetuity

As a business structure, a corporation is a mode that lasts the longest. An incorporated business has the potential to exist indefinitely. Individual players in the organization might leave the corporation, but it continues to exist. Incorporating cuts the potential legal pitfalls that can break other business structures.

Lower Health Insurance Premiums

Corporations have access to discounted medical insurance and dental plans. This helps owners reduce costs on this important expense. Medical reimbursement plans may also be an option for any health care expenses that aren't covered by an insurance plan.

Lower Risk of Being Audited

Schedule C income tax filers, who are self-employed taxpayers, face one of the highest risks of being audited by the IRS. This is because the IRS suspects self-employed people report incomes lower than actually earned and claim deductions that weren't earned. Incorporation reduces the chance the IRS will select your return for an audit.

Steps on How to Incorporate Yourself

If you’re wondering how to incorporate yourself, here’s a general roadmap to get started:

  1. Choose Your Business Structure – Decide whether to form a C Corporation, S Corporation, or LLC. Each offers different liability protections and tax implications.
  2. Pick a Business Name – Select a unique name compliant with your state’s naming guidelines. Check name availability with your state’s business registry.
  3. Appoint a Registered Agent – This person or service receives legal documents on your behalf. Most states require one.
  4. File Articles of Incorporation – Submit this formation document to your state’s Secretary of State office. It usually includes business name, address, registered agent, and incorporator details.
  5. Create Corporate Bylaws or Operating Agreement – While not always mandatory, these internal documents outline your business’s rules, management, and structure.
  6. Obtain an EIN (Employer Identification Number) – Apply through the IRS website to use this number for tax filings and opening a business bank account.
  7. Apply for Business Licenses and Permits – Depending on your location and industry, you may need local, state, or federal licenses.
  8. Maintain Compliance – File annual reports, pay required fees, and hold necessary shareholder or member meetings to stay in good standing.

These steps may vary slightly depending on your state, but this list provides the foundation for successfully incorporating yourself.

Common Mistakes to Avoid When Incorporating Yourself

Avoiding these pitfalls can save time and money during the incorporation process:

  • Choosing the Wrong Structure – Misunderstanding tax implications or liability protections can lead to higher taxes or legal exposure.
  • Failing to Separate Finances – Always open a separate bank account for your business. Mixing personal and business finances can pierce the corporate veil.
  • Neglecting Ongoing Compliance – Annual reports, franchise taxes, and meeting minutes are often overlooked but are essential to maintain your legal protections.
  • Using a Business Name That’s Already Taken – Not checking name availability can lead to rejection of your filing or trademark disputes.
  • Skipping Legal Advice – While DIY is possible, consulting an attorney helps ensure you're selecting the right structure and maintaining compliance.

Post-Incorporation Requirements

After incorporating, don’t forget these critical obligations:

  • File Annual Reports and Pay State Fees – Most states require annual filings and fees to maintain good standing.
  • Hold Regular Meetings – C Corps and S Corps must hold annual shareholder and director meetings with recorded minutes.
  • Maintain Corporate Records – Store your bylaws, meeting minutes, and resolutions securely.
  • Update State Records if Information Changes – Notify the Secretary of State about changes in address, registered agent, or officers.
  • Renew Licenses and Permits – Stay current on renewals to avoid penalties or business suspension.

Failing to meet these post-incorporation requirements could result in administrative dissolution or the loss of liability protection.

Who Should Consider Incorporating?

Incorporating yourself is especially beneficial for:

  • Freelancers and Independent Contractors – Helps legitimize your business and separates your personal and professional liability.
  • Consultants and Coaches – Establishes a formal structure, which can make clients more comfortable and willing to work with you.
  • Online Business Owners – Provides tax advantages and easier access to capital.
  • Professionals in High-Liability Fields – Doctors, accountants, and real estate agents often benefit from incorporation to limit personal exposure.

If you regularly earn income independently and want tax flexibility or legal protection, incorporating may be a smart move.

Frequently Asked Questions

  1. What is the best type of corporation for self-incorporation?
    S Corporations are often ideal for small business owners due to pass-through taxation, but C Corporations may be better for those seeking investment or issuing shares.
  2. How long does it take to incorporate yourself?
    Typically, incorporation takes between a few days and a few weeks, depending on the state and processing speed.
  3. Can I incorporate myself in a different state?
    Yes, but you may have to register as a foreign entity in your home state and comply with regulations in both.
  4. How much does it cost to incorporate yourself?
    Costs vary by state and structure but usually range from $50 to $500, not including legal or registered agent fees.
  5. Do I need a lawyer to incorporate myself?
    Not necessarily, but a lawyer can help you choose the right structure and ensure compliance with state laws. You can find experienced attorneys on UpCounsel for help.

If you need help with XYZ how to incorporate yourself, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.