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After you have figured out which company is the best fit for your needs, it is time to get set up. Incorporation itself isn't expensive, but the process can be complicated.
C Corp Setup S Corp Setup
C Corps and S Corps have a similar process for setting up, with only minor differences. That is why the first step is to choose a corporate company name to file under. Afterwards, you need to decide in what state to incorporate, as each state has different requirement and laws, and incorporation documents that you need to prepare. This brings us to the next thing you must prepare, which is the election of the Officers and Directors of the Corporation. Be sure to obtain the document that all States have, which is the Certificate of Incorporation. This basically certifies that you do have a corporation, and that it pays taxes, etc. Afterwards, you need to make sure that you Issue stock to the shareholders and comply with securities laws.
The next step is to determine the right capitalization for the corporation; in other words, how the money is going to work. You need to figure out salaries, number of employees, cost of doing business, and any other costs you may incur. This includes how the money will work amongst multiple shareholders. If you have more than one shareholder then you must have a Shareholder Agreement or Buy-Sell Agreement.
After you have filed, you need to then obtain your state and Federal Tax ID number. Be sure to determine if you need any special licenses for your business. Again, this will be determined by the state in which you file, and will also be different depending on the industry and type of corporation which you have created. Don't forget to set up a corporate bank account. As a separate business entity, your corporate bank account cannot be the same as your personal account. You will also need to make sure that you pay yourself a salary for tax purposes.
If you hire employees, make sure to have the proper forms and agreements for them. This will limit the liability of your corporation, fix your costs, and give you protection should a lazy employee claim wrongful termination to collect unemployment. Also, it will determine whether you file taxes for your employees, or whether they have to file their own (in the event you hire them as independant contractors).
The main documents that you need to file are as follows:
• C Corp: File 1120 tax form. (The corporation gets taxed).
• S Corp: File 1040 tax form. (The individual gets taxed).
LLC Setup
Again, filing for an LLC is inexpensive, but can be confusing.
• Obtain a copy of your state's LLC Articles of Organization form
• Choose a name for your business
• Fill out the LLC Articles of Organization form.
• Publish a notice in your local newspaper
• Submit your Articles of Organization form
• That's it, you're done!
• Create an LLC Operating Agreement
Click here to incorporate your own business.
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