Do I Need to Incorporate: Everything You need to Know
Do I need to incorporate? Incorporating is a way that a business can establish itself by being legally separate from its founders or owners.3 min read
2. Your Business Address
3. Names of Decision-Makers
4. Business Owner Names
5. Physical Address in State of Formation
Do I need to incorporate? Incorporating is a way that a business can establish itself by being legally separate from its founders or owners. This is a popular choice among business owners because it limits their personal liability for any business obligations, such as outside contracts.
There are a great many benefits to incorporating because they act as a separate entity but can still do many things that a person can. These include but are not limited to:
- Buying, selling, and owning property
- Having bank accounts
- Filing for lawsuits
- Signing contracts
Another good reason to incorporate is that it makes the sale or transfer of the business from one owner to another very simple. This is because ownership in a corporation is done in shares. This also helps when it comes to gaining outside investors. A corporation, unlike a general partnership or sole proprietorship, can continue and grow well after the lives of its founders end.
However, incorporating is not for everyone. Some businesses may find that the fees involved to set up and dissolve a corporation, as well as the extra reporting and recordkeeping requirements, are not worth the investment. A corporation can save you a substantial amount of money on your taxes. However, it may just as easily demand that you pay more, depending on your circumstances. It is best to discuss this decision with an accountant for the best tax advice.
After researching and discussing your best options, you may find that incorporating is just what you need to do. In that case, you will need to begin by preparing and filing articles of incorporation with your state. It is important to note that each state has its own set of qualifications for this process, therefore, you will want to make sure you know everything that it needed. However, here are a few of the basics you will need to handle.
Your Business Name
This name must be unique within your state. To help you with the process there is usually a search platform that you can use on each state's website. There are other restrictions to your name as well, such as the use of the word "bank" if you are not a financial institution and the use of obscene language. You must also end your business name with "Incorporated," "Company," "Corporation" or an abbreviation of them.
Your Business Address
This is the place where your business is conducted. It's possible for a P.O. Box to be used for this.
Names of Decision-Makers
Articles of incorporation will ask that you include the names of some of your decision-makers. They may ask for two different types of them as well, either incorporators and/or directors. Incorporators are people who are responsible for preparing, signing and filing your articles of incorporation and every state requires the names of at least one of these. Once the articles have been filed and a board of directors is chosen, the job of an incorporator usually ends.
You may also be asked to list or give a certain number of names of your initial board of directors. These people are designated with the task of installing corporate policies, goals, and officers who will run the business. For each state, there is a minimum amount of directors, typically one to three. The board of directors for small business usually consist of the owners, however, directors are not required to own shares.
Business Owner Names
You will need to dictate how many shares your business is allowed to issue in your articles of incorporation. Anyone who is an owner of the business is also a shareholder, as they own shares. However, you usually do not have to list the names of these shareholders.
Physical Address in State of Formation
While your business address can be a P.O. Box, your articles will need to include a physical street address (aka. registered office) within the state you are filing in. You also need to include the name of the person that can be found at that location who can receive notices, lawsuits, and any legal documents for the company (registered or statuary agent.)
Most often, your business location can be the same as the registered office and anyone 18 or over or a corporation can be the registered agent. You can hire a professional registered agent in the case that you do not have a physical address in your state or want someone else to handle such duties.
If you need help with incorporating your business 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.