DECISION MAKERS GUIDE TO INCORPORATING
1. Where should you incorporate your business?
2. Should you form an LLC or incorporate and elect an S Corporation (S-Corp)?
3. Do you need an EIN for your new incorporation or LLC?
4. How can you structure an LLC to achieve the best tax shelter?
5. What is a Registered Agent and DO YOU NEED ONE when you incorporate or form an LLC?
6. Do you need an attorney to incorporate or form an LLC?
7. How do you begin to incorporate or form an LLC?
1. Where Should You Incorporate Your Business?
When you start a business, you technically have the option of incorporating in any one of the 50 states, the District of Columbia, or even U.S. Territories including Puerto Rico. A corporation is not required to incorporate in the state in which it operates its business, however, because of a variety of legalities, it’s usually cheapest to simply incorporate in the state where you live (commonly referred to as your home state).
Four major issues are involved when determining the proper state in which to incorporate your business:
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- The location of your corporation’s facilities.
- The cost of incorporating in that state versus the additional cost of incorporating in another state and then qualifying that corporation to do business in the state of operations – double incorporation costs.
- The advantage and disadvantages of the tax impositions of one state versus or in addition to the other.
- Corporation related laws and judicial systems.
For larger entities (meaning massive corporations and Fortune 500 companies) the choice may be between the state of operations, Delaware and Nevada or Florida. If it is a smaller corporation that primarily works in one state, it is usually best to incorporate in the state of operations. If for no other reason than the cost of the local filing being less than filing in another state and then registering as a foreign corporation in the state of operation.
An out-of-state incorporation that qualifies to do business in the local state may also be subject to taxes, annual fees and even corporate laws in the state of incorporation AND the operating state. Thus, the actual advantage of incorporating in a state with very low or no corporate income tax is not as great as it appears, if your business must still qualify to do business in its state of operations.
We cannot provide legal advice about where to incorporate. We can only point out some basic considerations. You should consult your attorney if you are in need of legal input about whether, where and in what form to incorporate. We can only provide the administrative tools to perform the actual incorporation or LLC formation.
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2. Should you form an LLC or incorporate and elect an S Corporation?
An S Corporation eliminates double taxation. However, the S Corporation does not have the flexibility of an LLC in regard to the allocation of income to its members, as the owners must be given salaries commiserate with their duties.
An LLC may have an unlimited number of members. However, ownership in an S Corporation is limited to no more than 35 shareholders. Further, an S Corporation cannot have shareholders who are C Corporations, other S Corporations, certain trusts, LLC’s, partnerships or nonresident aliens.
LLC’s are permitted to own subsidiaries without restriction, while S Corporations are not allowed to own 80% or more of another corporation’s shares.
You can use our guaranteed services to form a corporation or form an LLC, and save a substantial amount of money you would otherwise pay an attorney. However, if you need legal or financial advice as to the type of corporation or LLC that would best suit your business needs, consult your attorney or financial advisor.
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3. Do you need an EIN for your new incorporation or LLC?
Once the LLC or Corporation has been formed and is ready to do business, it is the time to apply for a federal employer identification number (EIN). Generally, any LLC or Corporation doing business within the U.S. is required to have an EIN. In fact, the EIN is necessary when filing tax returns and for establishing bank accounts.
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A LLC or Corporation can receive an EIN by completing and submitting IRS Form SS-4. However, you can have FORM A CORP save you this tedious paperwork by having Form-a-Corp complete and submit the necessary EIN form on your behalf.
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4. How can you structure an LLC to achieve the best tax shelter?
If an LLC wants to take advantage of pass-through taxation, it must meet certain pre-established requirements. To have pass-through taxation an LLC may not have more than two of the following characteristics of a corporation:
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- Limited Liability
- Unlimited Life
- Free Transferability of Interest
- Centralized Management
The LLC can have limited liability, and (if the LLC is managed by managers), the LLC will have centralized management-thus only two of the above attributes.
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5. What is a Registered Agent and DO YOU NEED ONE when you incorporate or form an LLC?
No matter where you live or where you start your business, the answer to the question, “What is a registered agent?” is always the same. A registered agent is an individual or service company must be responsible for receiving important legal and tax documents. This service is provided by an “agent” of the LLC or Corporation who is “registered” with the state of incorporation. Thus, the term “Registered Agent.” The registered agent must have a valid street address within the state of incorporation, and be available during normal business hours to receive documents.
The services performed by a Registered Agent may include:
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- Receiving and forwarding legal documents
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- Receiving and forwarding tax and report forms
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- Accepting and forwarding service of process
Our Registered Agent Service
For years, Form-A-Corp had been providing registered agent service via one of the oldest registered agent services in the world at a cost of nearly $400 a year. We thought that prestige might mean better service. But after doing a lot of research, we’ve come to a different conclusion. Now at Form-A-Corp, with every incorporation service order, we include what we believe to be the best registered agent service there is. And better yet, we have secured a guaranteed low price from Registered Agents Inc., the leader in registered agent services, at $129 a year in any state, saving our clients money and providing a higher level of service and customer care.
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6. Do you need an attorney to incorporate or form an LLC?
No, an attorney is not a legal requirement.. However, certain knowledge is necessary in order to properly file the required incorporation or LLC documentation in the designated state. You can use our guaranteed services to form your corporation or LLC, and save a substantial amount of money you would otherwise pay an attorney. However, if you need legal or financial advice as to the type of entity that would best suit your business needs, consult your attorney or financial advisor.
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7. How do you begin to incorporate or form an LLC?
After you decide that a corporation, an LLC or an S corporation is best for your business, articles of organization or articles of incorporation (charter or certificate of incorporation in certain states) must be filed with the proper state agency together with certain fees.
FORM A CORP will provide all necessary services to ensure that incorporation is completed in the shortest period of time, with the highest degree of skill and efficiency, and at the lowest cost.
After the articles of organization or articles of incorporation (charter or certificate of incorporation in certain states) are filed and accepted by the designated state, your LLC or Corporation must hold an organizational meeting and adopt a proper Operating Agreement. The necessary Operating Agreement recording material, LLC or Corporate Seal and membership or stock certificates are all included in FORM A CORP’s services.
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