What are the requirements needed to incorporate your company in the United States and Canada?
Incorporation is a big step in the growth of your small business. Having that “Inc.” at the end of your business name will make investors, lenders, vendors, and everyday customers take your operation more seriously.
And that’s not to mention that incorporation makes your company a separate legal entity from yourself. This gives you certain tax advantages and liability protection should your company take on debt or go bankrupt.
So, learning how to incorporate a company is a good idea no matter how small your business is right now. This company incorporation guide will cover the key steps you need to take.
Picking a name for your business is often the most exciting part. But it can also cause some headaches.
The main legal requirement is you can’t use a name that’s already taken. Your state should have a corporation search tool to check the availability of any name.
There are two main forms of corporate entity that your small business can choose from.
Limited Liability Companies (LLCs) are how many small businesses start. Halfway between a partnership and a corporation, the LLC is owned and can be managed by its stake-holding members.
A traditional corporation (Inc.) is the other main option and is subdivided into S corporations (S corp) or C corporations (C corp).
S corps are usually for smaller businesses and are usually managed and run by their owner or owners. S corps can have the business taxed as normal, or instead, have the business branded as a pass-through entity. With the latter option, the owners pay the business’ taxes on their personal tax returns.
C corps are what most people think of when they hear the word corporation. They’re usually large, publicly traded companies owned by the shareholders and managed by their board of directors.
When it comes time to incorporate your company, using a service to help you navigate the process can help you make the right decision. To see an example of such a company, check out opstart.ca
Much like how the IRS uses social security numbers to keep track of individuals, it assigns an Employer Identification Number (EIN) to keep track of a business.
You can apply for your EIN online at the IRS website. Even if you’re your company’s only employee, you need an EIN to proceed. The next thing you need to do when incorporating your business is to set up your financial accounts.
Set Up Financial Accounts If You Want to Incorporate Your Company
You’ll need a corporate bank account to handle your business expenses. Not only that, but this account confirms the legitimacy and independence of the business. It also proves the legal separation between the owner and the company.
With your banking in order, you and your account should settle how you handle taxation. If you’re an LLC or S corps, this probably means you’re a candidate for pass-through taxation.
Last, you need to make sure that you comply with not only federal regulations but state and local laws as well.
This can include factors like the physical address your company is registered to, licenses like food handler permits, and the like.
This guide on how to incorporate a company covers the basic stages in the process. However, some factors like a given state or country’s requirements for setting up a company are too varied to cover at length here.
There’s always more to learn. So, to ensure you have all the information you need to make your new company a success, be sure to follow our latest business news and guides.