Jacqi is a seasoned legal professional committed to simplifying complex legal issues. With her in-depth knowledge of tax laws, she thrives on helping individuals and businesses navigate the maze of financial obligations. Clients trust Jacqi to provide comprehensive solutions to empower their success. There are additional corporate structures such as professional corporations, nonprofit corporations and S-corps. Appoint a board of directors and draft bylaws to govern your corporation.
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The nonprofit B Lab administers this designation to prioritize consumer demands for economic inclusivity and sustainability. There are several corporation types, including C corporation, S corporation, B corporation, closed corporation and nonprofit corporation. Each corporation type has its own benefits, disadvantages and legal requirements.
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Kelly DuFord Williams, founder and managing partner of Slate Law Group, outlined six general steps a small business must take to become a corporation. However, every state has specific guidelines, so your process may vary. Check the specific corporation requirements for the state where your business will operate. If you’ve sorted through the many types of business structures and decided to start a corporation, you’re facing a list of important—but manageable—tasks.
But countless other businesses have done it time and again, and so can yours. Plus, the legal benefits and fundraising possibilities that corporate status brings may be worth the effort. Professional legal counsel and business consultants can help you navigate the process and decide whether or not to take the leap. Public charities and foundations, also known as 501(c)(3) organizations, are among the most familiar types of nonprofits. Social or political nonprofits, also known as 501(c)(4) organizations, may also be familiar.
Sole proprietorship
To incorporate your business successfully, you need to file your Articles of Incorporation with the appropriate state agency, which can similarly be known as a certificate of incorporation or charter. This document should detail your corporation’s name, address, purpose, and registered agent. After filing, you may need specific licenses and permits based on your industry. Regulations can vary, so it’s vital to check state-specific requirements. If your business plans to sell stock, you might additionally have to comply with federal securities regulations. Securing licenses and permits before starting operations is critical to avoid penalties.
Before you get started, it may be helpful to consult with a legal or financial professional to determine if incorporation is the right choice for your business. A corporation is usually owned by shareholders and it may also be overseen by a board of directors. As such, you’re not personally responsible for the debts and liabilities of the business. If the corporation is sued or goes bankrupt, your personal assets are generally protected.
- One of the most exciting parts of starting a business is picking the name.
- Prior to incorporating, a business should ensure it is adhering to local business licensing and zoning laws.
- While incorporation has many beneficial legal outcomes, it also involves additional responsibilities such as ongoing reporting and disclosure obligations under law.
Real estate boards are classified as Section 501(c)(6) nonprofits, and a cooperative hospital service organization is classified as a Section 501(e) nonprofit. To obtain tax-exempt status, nonprofits must apply at the federal and state (if applicable) level — it is not automatically granted when the nonprofit is incorporated. You create a corporation, which is done by filing a document generally called Articles of Incorporation (sometimes called a Certificate of Incorporation) in the appropriate state. Then, in order to be taxed as an S corporation you must file Form 2553 with the IRS to elect S corporation status. A general partnership offers owners no liability protection — partners are all liable for business debts and obligations, and their personal assets can be used to satisfy those debts. The legal and tax structure of your corporation can have a major impact on the way you run your business and the taxes you’ll pay.
Adopt a set of rules
The incorporation process looks different depending on where your business is located and whether you’re converting from another business entity to a corporation. As a C corporation, taxes are paid twice; first, the business pays taxes on its profits, and then shareholders pay taxes on after-tax dividends. To incorporate in Washington, you must file the Washington Initial Report within 120 days of your incorporation date.
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- I don’t really make money off this but I want to get the word out and receiving a four-cent postcard makes people wonder.
- To officially register your corporation in New Mexico, you must file the New Mexico Corporate Initial Report.
- Even if you already have an EIN for your partnership or sole proprietorship, you’ll need a new EIN for the corporation.
- Just like a corporation, a limited liability company (LLC) protects owners from business liabilities and debts.
For example, professional service providers tend to form partnerships for flexibility and ease of formation. With a C corp, S corp, and LLC, only the entity can be sued, not owners or officers. Once your corporation’s financial management is in place, the next step involves taking care of the necessary paperwork to operate legally.
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Choosing a location for your incorporation is crucial, as it directly affects your business’s legal compliance and tax obligations. When figuring out how to be incorporated, consider where your business primarily operates. States like Delaware are favored for their business-friendly laws and tax benefits. Make certain your location meets local zoning regulations, as this impacts where you can physically operate. Remember, a registered agent must have a physical address in your chosen state to receive official correspondence.
While it might mean extra paperwork, incorporating in a different state can come with perks, such as lower fees, fewer reporting requirements or even tax advantages. Many businesses are incorporated in Delaware, for example, because the state makes the incorporation process extremely easy. Delaware also doesn’t impose income tax on entities that do business outside the state.
It’s best to check with your state or local small business attorney. To officially register your corporation in New Mexico, you must file the New Mexico Corporate Initial Report. It must be filed within 30 days of receiving become incorporated your certificate of incorporation from the New Mexico Secretary of State. When forming a corporation in Nebraska, you must also publish a notice of incorporation in a legal newspaper located in the same county as your corporation’s office. Additionally, if you wish to elect S corporation status, you should also discuss this at the initial meeting and gain approval.