What to Know About Incorporating Your Business

Incorporation is one of the biggest milestones for any business. It’s also one of those mysterious processes not commonly known outside of the legal and business worlds. For some business owners, it can be confusing trying to figure out when the right time to incorporate is, as well as exactly what they’ll need to know in order to do so. Lucky for you, we’ve gathered some general tips and information you should know when it comes to incorporation. 

What does incorporating do? 

The act of incorporation effectively creates a corporation, which is an artificial, yet legal, entity that separates itself from the individuals involved with the company’s owners. It acts like its own person; the corporation can own property, sign a contract, and file lawsuits, amongst a number of other matters. 

There are plenty of benefits to incorporating, including potential tax advantages and liability protection to protecting your personal wealth and assets from your business liabilities. 

Because no business is the same, there are several types of corporations that might be the best fit: C-corp, S-corp, and a LLC. (Well, a LLC -- a limited liability company -- is technically not a corporation, but it is still considered a separate entity from the owners.) You may want to consider an LLC if you expect the owners to be able to absorb any losses for the first few years, if you prefer a more flexible accounting or management structure, or if you want to minimize the amount of annual meetings a corporation usually needs. 

So how do I incorporate my business? 

You can’t just snap your fingers and call your business a corporation. There are a few things you should know about the process before deciding to fill out an application. 

First, you need to make sure your business is in the clear with local business licensing laws according to whatever state you're in. Then, you need to make sure your business name is unique and not being used by any other corporation. The secretary of state (of whichever state your business is in) will not allow you to use the same name as another corporation in that area. You will also have to add an “Inc.” or “Co.” at the end to signify you’re now a corporation and will need to appoint a registered agent that can accept official mail on your company’s behalf -- this can be your business attorney, if you have one, but it can also be a director or officer if needed. 

Additionally, you will need to draft articles of incorporation. This is a document you have on file with the state you’re in to acknowledge that you’re now a corporation. It’s usually a one or two-page document, and any significant information you need to address in the file can be found on your secretary of state’s website. You then file the articles of incorporation with your state’s business filing agency, which will require a fee up to $500, and then wait for approval from the state secretary. (You should usually receive an approval notice within 5-10 business days, although this may vary depending on the state.) 

Incorporating a business is important because it protects your brand and personal assets, and with the right process you’ll be well on your way to becoming a mainstay in your industry.

Happy filing!