An online incorporation service is a provider that can help register your business. This often means incorporating the business as an S or C corporation or forming an LLC. By doing this, the owner or owners of a company can form a legal entity to conduct business. You'll need to complete all of the required documents and choose a registered agent. If you decide to incorporate, it's required by most states that you have issues shares, hold at least one organizational meeting, and adopt bylaws.

In order to become an S corporation, you'll need to file an election statement with the Internal Revenue Service. There are fewer state requirements when you have an LLC, but it's smart to have an operating agreement in place.

Why is Incorporating a Business Important?

When you decide to incorporate, the business becomes a legal entity that's separate from its owners. Whether it's an S corporation, a C corporation, or an LLC, the new entity has increased credibility with potential customers, employees, lenders, and vendors. Having limited liability is another main benefit. If there isn't incorporation, you'll be responsible for any losses or debts the business accumulates.

If you decide to incorporate, you'll be held responsible for just the amount of money you personally invested or any business debts that you personally guaranteed. You can't use personal assets to satisfy the liabilities and debts of the business.

Most Popular Business Types

There are several different types of businesses, including the following:

  • LLCs - combine liability protection of corporations with the flexibility of a partnership and lets you avoid double taxation.
  • C corporation - a structure that's well-established and has clear governance requirements.
  • S corporation - protects the owners and gives them tax benefits.

Benefits of Incorporating a Business

There are many benefits when you incorporate a business. You will increase your company's credibility and professionalism when you have Inc. or Corp. after the business name. Banks tend to favor corporations and might feel more secure lending to corporations than to a sole proprietor, private party, or DBA. If you want a loan, you'll need to be incorporated, and if you want investors in the company, you need to be able to sell stock.

Unfortunately, companies still have to pay the IRS even if they incorporate. You might not pay as much depending on which formation you choose. Being incorporated means you're a separate entity and can decide how you'll get taxed. Due to this, you can structure transactions between your corporation and you to save money tax-wise. There are some states, such as Nevada and Delaware, that offer more privacy protection than others. In the state of Delaware, you don't need to tell the state that you're the owner. You only need to have a designated contact person and a registered agent.

As an LLC or corporation, the business has longevity. That means it can last indefinitely no matter what happens to the shareholders, officers, or owners. This is compared to a partnership, where it gets complicated when one of the partners dies. If you want to make a sale and see a profit from your company, you should incorporate it. These types of businesses are safer for potential buyers to purchase. If someone buys the sole proprietorship, they might be held responsible for any mistakes you make, even if the new owner had nothing to do with it.

When you incorporate, your personal assets that aren't business-related are protected. This means no one can take your home or life savings away. However, as a sole proprietor, all your assets and property are free game.

It's often necessary to have a federal tax identification number to open bank accounts and file tax returns. All 50 states require a registered agent to handle state and legal documents correctly and promptly.

Should You Use an Online Incorporation Service?

If you're beginning a small business or deciding if you should incorporate your current business, you've probably looked at online incorporation services to see if it's worth it. You should consider several factors, including if you'll save attorney fees when incorporating online.

If you need help with an online incorporation service, 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.