The Six Things I Need To Know To Incorporate Today

The most important reason to incorporate your business is to protect yourself from business liabilities.

Incorporation is the process by which a company incorporates and thereby gains the benefits and status of an incorporated company. This process entails preparing certain documents, including a document referred to as the “Articles of Incorporation,” and filing the documents with the Secretary of State. (For an LLC, the main document used to incorporate is referred to as the “Articles of Organization.”) Below is a list and discussion of the essential knowledge required to successfully incorporate a business.

Once you are able to answer these six questions, you are ready to incorporate. Incorporating with Enitia Corporation entails filling out an online form, which will take about ten minutes to complete. We will then use the information you have supplied us to prepare the necessary documents and file them with your chosen state. We will walk you through the process and enable you to effectively incorporate your business based on your business’s specific needs, at a fraction of the cost of a lawyer.

Where to incorporate

The choice of where to incorporate is an important one, as the state of incorporation will be the company’s legal home. However, the legal home is not necessarily the company’s physical home. Most states do not require a business, which is incorporated under its laws, to maintain an office within the state. A company can operate and carry on all of its business in a state other than its state of incorporation. This opens a wide range of options of states in which to incorporate, but for most businesses the choice usually boils down to the State of Operation, Delaware, or Nevada.

Your State

Incorporating in the state of operation, your home state, is generally the best option for a mid-sized to small company where virtually all business is to be conducted within that state. Incorporating in the state of operation is preferable because it is usually the least complicated and least costly choice. Click to learn more . . .

Delaware

Delaware has the reputation of the incorporation capital of the United States. Thousands of start-up companies make the choice to incorporate in Delaware every year, despite the fact that they operate completely or partially in states other than Delaware. Although Delaware incorporation has the potential to be advantageous to all corporations due to the state’s low incorporation fees, low taxes, and management flexibility, it is the larger corporations who stand to benefit the most. In fact, for smaller out of state corporations, the disadvantages of Delaware incorporation may outweigh the benefits. Click to learn more . . .

Nevada

Recently, Nevada has gained a reputation for its favorable corporate laws. As such, a growing number of out of state businesses choose to incorporate in Nevada. These businesses are attracted to Nevada by the state’s low taxes, low fees and corporate privacy laws. However, like Delaware incorporation, larger corporations have the most to gain from incorporating in Nevada. Similar to Delaware, the smaller, out of state corporations may find that the disadvantages of Nevada incorporation outweigh the benefits. Click to learn more . . .

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The corporate form (C-Corp, S-Corp, or LLC)

There are essentially three options for the corporate form of a for-profit company: a C-Corporation, an S-Corporation, or an LLC.

C-Corporation

A C-Corporation is the traditional and most common type corporation. The benefits of a C-Corporation include personal liability protection, lack of limitation on the number of shareholders allowed, the ease by which stock can be transferred, low state formation fees and the public’s familiarity with the C-Corporation as a business entity. The major disadvantage of a C-Corporation is that it is subject to “double taxation.” Click to learn more . . .

S-Corporation

The S-Corporation is similar in structure to a C-Corporation, yet it is not subject to the C-Corporation “double tax.” The profits of an S-Corporation will only be taxed at the individual level, whereas a C-Corporation is taxed at the corporate and individual level.

An S-Corporation is initially formed as a C-Corporation by filing the Articles of Incorporation within a state. The C-Corporation can then become an S-Corporation when an extra step is taken by filing with the IRS. However, not all C-Corporations are able to take advantage of the S-Corporation status. A corporation is only eligible for the S-Corporation election if it meets a list of detailed ownership requirements. Click to learn more . . .

Limited Liability Company (LLC)

An LLC offers the best of both worlds of business types. An LLC is favorable because it avoids the “double tax” of a corporation, yet also affords its owners the personal liability protection of a corporation. Other benefits of an LLC include less stringent state formality requirements, management flexibility, and, in relation to the S-Corporation, relaxed ownership qualifications. However, the drawbacks of an LLC include restrictions in ownership transfer, and the public’s lack of familiarity with the LLC as a corporate form. Click to learn more . . .

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   The Name of the company

Basically all that is required in selecting a corporate name is that the name is distinguishable from already existing corporate names. Within the Articles of Incorporation a corporate name must be followed by the word “Corporation,” “Incorporated,” or “Company.” An LLC name must be followed by the words “Limited Liability Company,” or “Limited.” An abbreviation of the corporate indication, such as “Inc.,” “Co.,” or “LLC” is also acceptable.

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 For LLCs: The management type of the LLC

An LLC’s Articles of Organization ask to designate between one of two types of management structures. An LLC can either be Manager-managed, or Member-managed. If an LLC is Manager-managed, the power and authority of the company’s management lies within its Board of Managers, which is similar to the Board of Directors of a Corporation. If an LLC is Member-managed, there is no Board of Managers and the LLC is directly managed by its Members (the owners).

Either type of management (Members or Board of Managers) can delegate power and authority to the company’s officers. If the management does delegate authority, it will retain the responsibility to oversee the affairs and activities of the company.

If Manager-managed, the Members elect, or approve of each proposed Manager at the organizational meeting. Each Manager may be appointed by the owners for a one year term, expiring at or before the following annual Member meeting.

 Member names and addresses

In an LLC, the “Members” are the owners of the company. In a few states, the Articles of Organization require the names and addresses of all the initial Members. It is not necessary to amend the Articles of Organization if a Member is added to the LLC in the future.

 Manager names and addresses

If the LLC is Manager-managed, the power and authority of the company’s management lies within its Board of Managers, which is similar to the Board of Directors in a C or S-Corporation. In some state, the Articles of Organization require the names and addresses of all Managers to serve on the initial Board of Managers of the company.

Most states require that the Board of Mangers, whether listed in the Articles or not, have at least three Managers, unless there are fewer than three Members (owners). Where there are fewer than three Members, the number of Managers in these states must match the number of Members.

There is no requirement that Managers, Members and officers be different people. In a small LLC, the Managers are usually Members or officers as well.
 

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