Do-it-Yourself Incorporation: Everything You Need to Know
Do-it-yourself incorporation involves forming a corporation on your own without the help of an attorney or company that specializes in such assistance.3 min read
Do-it-yourself incorporation involves forming a corporation on your own without the help of an attorney or company that specializes in such assistance. Depending on the type of corporation you want to own and operate, you have a few options with regard to incorporating and whether you choose the assistance of a third party or choose to do it yourself.
As long as you thoroughly review the requirements associated with incorporating in the state where you plan on doing business, then you should have no issues with forming your corporation on your own. Particularly, if you are unable to financially pay for the assistance, then you should strongly consider doing it yourself. This will allow you to save on the additional fees associated with hiring an attorney or third party company.
Considerations for Incorporating on Your Own
When you choose to incorporate on your own, you want to conduct research as to how to incorporate your business. You should visit the Secretary of State’s website to find out what is required of you in terms of the steps that need to be taken, deadlines to abide by, and how much it will cost to incorporate.
First and foremost, if you want to form a small business, it might be best for you to form a sole proprietorship as opposed to an actual corporation. This is one of the many considerations to keep in mind when forming your business. Most people start out by forming sole proprietorships and then eventually convert to corporations depending on how well the business is doing financially.
However, if you would prefer to form a corporation immediately, then you should know of the many advantages of forming a corporation and how this type of legal structure can help you and your business.
Advantages of Incorporating
Forming a corporation will provide you with many benefits, including the following:
- Liability protection
- Enhanced credibility
- Easier lending abilities
- Ease of separating personal income from business income
First and foremost, corporations provide limited liability, similar to the Limited Liability Company (LLC) business structure. Limited liability means that you cannot be held personally liable for your business’s outstanding debts and liabilities. However, in a sole proprietorship, you will be fully responsible for your company’s debts; thus, the sole proprietorship isn’t a distinct legal entity from its owner. This is one of the many benefits of forming a corporation, along with a reason why many sole proprietors eventually transition into a corporation.
When you incorporate, you will enhance your credibility as a business owner. In fact, many third parties, particularly large companies, might choose not to do business with a sole proprietorship due to the lack of credibility since the sole proprietorship essentially operates as an extension of the business owner. This means that the sole proprietor will sign any contracts involving the sole proprietorship. Thus, any breach in contract on the part of the business owner will mean that the creditor must go after the owner’s personal assets. Similarly, most banks will be more willing to lend money to a formal business; either an LLC or corporation.
Once you incorporate, you can more easily separate your personal assets from your business assets, as most banks will only allow a business owner to open a business bank account after the owner has formally established the business. Sole proprietors, however, might have difficulty opening a business bank account since sole proprietorships generally don’t have formal paperwork associated with it. This is another reason why a sole proprietor might choose to eventually transition into a corporation. It becomes much easier to separate the assets and ensure that the corporation is operating as a separate and distinct legal entity from its owner.
If you are ready to incorporate your business on your own, write down any notes that are important to remember. This way, you can properly incorporate your business while filing the required paperwork, paying the applicable fees, and keeping track of the paperwork associated with your business. You’ll want to prevent any potential mishaps, as it could be costly and time consuming to fix, and might even further delay the formation process.
If you need help learning more about do-it-yourself incorporation, 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.