{"id":111026,"date":"2023-03-24T13:14:38","date_gmt":"2023-03-24T13:14:38","guid":{"rendered":"https:\/\/businessyield.com\/?p=111026"},"modified":"2023-03-25T11:24:47","modified_gmt":"2023-03-25T11:24:47","slug":"incorporation","status":"publish","type":"post","link":"https:\/\/businessyield.com\/business-strategies\/incorporation\/","title":{"rendered":"INCORPORATION: Meaning, Taxes, Articles & Differences.","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"

Incorporation is a key decision many business owners make to structure and take their businesses to the next level. It comes with a lot of planning and careful steps. But how do you decide if incorporation is the best step for your business? This post will explore the meaning of incorporation, the steps to incorporating your business, the pros and cons of incorporation, articles of incorporation<\/a>, and incorporation tax.<\/p>

What Does Incorporation Mean?<\/span><\/h2>

Incorporation is the process of organizing and establishing a business. A business can raise money, sell shares, and divest ownership of a piece of the company more easily. Also, to become a corporation, a business writes and files articles of incorporation with the government. These articles are legal proof that the corporation was created.<\/p>

The result of this is a legal entity called a corporation, which keeps the firm’s assets and income separate from its owners and investors. Additionally, a new company with stock shares is formed by incorporating, making it easier for the company to get investors from outside. <\/p>

Steps to Incorporating a Company<\/span><\/h2>

An incorporated corporation is a legally recognized independent legal entity. The incorporated companies are distinguished by phrases such as “Inc.” or ‘Limited.” in their names. Also, they become a corporate legal entity distinct from their owners. <\/p>

Incorporating a company involves several steps; also, the process can differ depending on the state and type of corporation. Here are the steps to incorporating a company:<\/p>

#1. Decide on a Business Structure <\/span><\/h3>

Before you incorporate a business, you need to know the financial, legal, and management benefits of doing so. Once you have decided that incorporating is the right step for your business, you can choose the structure that best suits your needs.<\/p>

Choosing a business structure is crucial, and if you need help deciding a structure, you can contact a business attorney. Also, most businesses are sole proprietorships, partnerships, or corporations. But when deciding on a business structure, think about long-term strategies and operations <\/p>

#2. Comply with Licensing and Zoning Laws<\/span><\/h3>

Before incorporating a business, ensure it fits your area’s licensing and zoning laws. This step is necessary to avoid compliance issues once you establish your corporation and begin running your business. <\/p>

Before incorporating, check the local licensing and zoning requirements because though not all businesses need permits or licenses, some do.<\/p>

#3. Choose the State Where You Want to Incorporate<\/h3>

Select the state where you want to incorporate your business since incorporation is regulated at the state level, and cities might have added requirements. <\/p>

You should talk to your secretary of state’s office and a lawyer about your options to ensure you follow the rules in your area.<\/p>

#4. Choose a Name for Your Corporation<\/h3>

Choose a unique name for your corporation while adhering to the state’s naming guidelines. The name should not be similar to any other corporation’s name in the state.<\/p>

Avoid trademark infringement and branding confusion with a distinctive name. Keep incorporation abbreviations like Inc. and Ltd. in mind when choosing a unique name.<\/p>

Furthermore, online directories can search for business names. These directories let users search for desired names. Several states allow incorporation applicants to reserve a name for 60\u2013120 days.<\/p>

#5. File Articles of Incorporation<\/span><\/h3>

File the Articles of Incorporation with the secretary of state’s office in the state where you want to incorporate. Articles of incorporation filing requirements vary by state. A company’s name, location, public or private shares, registered agent, and incorporator are all listed in the articles of incorporation. <\/p>

#6. Draft Corporate Bylaws<\/span><\/h3>

Draft corporate bylaws that outline the corporation’s rules and procedures. In addition to the articles of incorporation, the bylaws usually have information about how the company runs, how shares are insured, how voting works, and how shareholder meetings are run.<\/p>

A firm often consults its bylaws to determine its best course of action, which can also be changed to adapt. Some other entities may need these, like financial institutions, and they may require bylaws when setting up a bank account<\/p>

#7. Obtain Necessary Business Licenses and Permits<\/span><\/h3>

After incorporating, apply for the appropriate licenses and permits in your state. Check with your state to see if they have any additional requirements.<\/p>

Incorporating a business can take one to six weeks, and costs differ depending on the company’s location. Incorporating offers several benefits, including personal asset protection, tax advantages, deductible expenses, credibility and maturity, name protection, and longevity<\/p>

#8. Hold Board Meetings<\/span><\/h3>

Board members will execute crucial activities at the first meeting. During the first meeting, the board should decide about adopting the articles of incorporation and bylaws, allowing and issuing stock, electing executives, and making other operational decisions. Meeting minutes are necessary because some entities may need a copy.<\/p>

#9. Finish Extras<\/span><\/h3>

Business owners should perform various operational responsibilities after incorporation. Companies should apply for an employer identification number, open a bank account, file federal taxes, announce their incorporation, file annual reports\u2014also Issue stock to the shareholders. The shares represent ownership in the corporation, and the shareholders elect the board of directors.<\/p>

The Pros and Cons of Incorporation<\/span><\/h2>

Incorporation is the legal process of forming a company as a corporate entity, and it comes with its own distinct set of pros and cons. The following are the advantages and disadvantages:<\/p>

Cons of Incorporating a Business<\/span><\/h3>