| Incorporating a small startup business can add up | | | | access to their more sophisticated corporation |
| quickly if you're not careful. Fortunately, small | | | | legal system. |
| businesses have several options that will help | | | | By increasing the number of states you register |
| them substantially reduce the cost. | | | | your corporation in, you jack up the number of |
| Consider Do-it-yourself Kits | | | | states you pay initial and annual licensing fees to. |
| A first easy tip that will work for some business | | | | You also increase the number of state corporate |
| owners: Consider preparing the incorporation | | | | income tax returns you or your accountant need |
| paperwork yourself. In many states, you only | | | | to prepare. |
| need to file the articles of incorporation to form | | | | Note: States usually charge around $100 annually |
| the actual corporation. As a practical matter, the | | | | for registration, but some (like California) charge |
| only additional documents you need are corporate | | | | quite a bit more. Furthermore, your accountant |
| by-laws (which you can order from any number | | | | probably increases the fee he or she charges for |
| of online sources) and your Internal Revenue | | | | your annual tax return by a set amount (easily |
| Service Employer Identification Number application. | | | | $100 to $200 and sometimes much more) for |
| That's really it. | | | | each state corporate tax return you need. |
| Accordingly, if you've owned or operated a | | | | Consider the Limited Liability Company Option |
| corporation before or if you're someone who's | | | | You can get good liability protection for your |
| comfortable reading and reviewing business and | | | | business both by using a traditional corporation |
| legal documents, absolutely, consider the | | | | and also by using a limited liability company. But |
| do-it-yourself incorporation route. Do-it-yourself | | | | for small businesses, the limited liability company |
| incorporation can save you several hundred dollars | | | | option delivers one, really significant advantage. An |
| of setup costs. | | | | LLC can often have its income and deductions |
| Don't Automatically Sign Up for Registered Agent | | | | reported on its owners tax return. That means |
| Services | | | | the LLC doesn't need its own (probably |
| Many paralegal services encourage you to sign up | | | | expensive) federal and state corporate income |
| for their registered agency services. And that | | | | tax return. |
| sounds like a great notion. A registered agent is | | | | For example, an LLC owned by a single individual |
| the human being you designate as being the "go | | | | and an LLC owned by husband-and-wife |
| to" person if someone (like a state government | | | | partnerships in community property states can |
| agency) has questions for your corporation. | | | | often add the LLC income and deductions to the |
| The problem here is that often you're paying an | | | | 1040 tax return. Similarly, an LLC owned by |
| awfully lot of money--regularly $100 to $200 a | | | | another corporation can have its income and |
| year--just for someone to agree to forward any | | | | deductions reported on that "owner" corporation's |
| mail. If you want people to be able to contact | | | | tax return. |
| you--like customers, employees and prospective | | | | Note: An LLC owned by two or more people |
| customers and employees-- you might as well | | | | needs to report its income and deductions on a |
| think about being your own registered agent. | | | | partnership return, but partnership returns can |
| Note: If your corporation registers in states | | | | also be simpler and less expensive to prepare |
| where you don't have employees able to act as a | | | | than a regular corporation or S corporation tax |
| registered agent, you may be required to get | | | | return. |
| registered agents in those states. | | | | Skip Incorporating All Together |
| Don't Unthinkingly Obligate Yourself to Foreign | | | | A final, perhaps odd idea... You may want to |
| Registration Requirements | | | | consider other cheaper options for protecting |
| The basic rule about registering a corporation is | | | | yourself and your business. Yes, incorporating |
| that you need to register in the state that | | | | delivers big benefits in terms of liability protection |
| creates (gives life to) the corporation... and you | | | | (when you start being profitable) and in terms of |
| need to register in any other states where you | | | | tax planning possibilities. But incorporation isn't the |
| own property, employ people or operate the | | | | only way to protect yourself. You can stay away |
| business. Now, there may be good solid business | | | | from risky situations, for example. You can buy |
| reasons to register in several states. But be | | | | liability insurance. And you implement some basic |
| careful you don't unknowingly obligate yourself to | | | | asset protection strategies (such as storing wealth |
| register in a bunch of different states. For | | | | in locations like retirement plans where creditors |
| example, don't rush to incorporate in some state | | | | can't get at the wealth). |
| like Nevada to save taxes or in Delaware to get | | | | |