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Is Your Business Incorporated? Featured

Is Your Business Incorporated? "Midtown Manhattan in New York City, United States."

Incorporating a business refers to a legal process used to form a company's corporate entity. It simply means that you are creating an entity that is legally separate from you. A corporation can own property, sign contracts and can be sold, go bankrupt without your involvement. Specifically, you will not be held personally liable for these because an incorporated company is a separate legal entity recognized by law. They are identified with terms like “Inc” or “Limited” in their names and are separate from their owners. Although the steps of incorporating a company vary from one state to the other, there are six basic steps you need to know.

  1. Choose a business name

A company is identified through its name, and the first step is to choose an appropriate name for it. This name is stated in the company's memorandum of association and must end with “Limited” for a public company and “Private Limited” if it is a private company. The first step is checking whether the chosen name is available for adoption by writing to the registrar of companies in your state.  Your state will have a corporation search service that allows you to check on the availability of the business name at any time. In the age of technology, you might want to create a website. This means that you have to look for a domain name too. Look at the United States Patent and Trademark Office to ensure the uniqueness of your trademark.

  1. Pick a business location

Although it is not necessary that you rush to rent an office space during the registration of your business, you still require an appropriate business address. Most local and state governments restrict the location of a business and often require companies to adhere to codes and regulations regarding the physical address of a business. You can take advantage of virtual offices and shared workspaces run by some companies like WeWork as you begin. Alternatively, you could sublet an office space or open a rented Post Office box. However, if you already have several employees, you should have a commercial workspace.

  1. Choose a corporate entity

After choosing the name and location of your business, you need to decide which among the two forms of corporate entities to choose from. A Limited Liability Company (LLC) is the first option and is often chosen by small businesses as they start. An LLC is a hybrid between a partnership and a corporation. It is owned and mostly managed by its members, most of whom hold company stakes. Your other option is a corporation (either S corporation or C corporation (S corp or C corp, respectively)). The key difference is that C corporations are large publicly traded companies owned and managed by shareholders and the board of directors, respectively. On the other hand, an S corp is intended for smaller businesses and can be taxed regularly or labelled as a pass-through entity.

  1. Obtain a tax ID number

IRS needs to keep track of businesses through an Employer Identification Number (EIN). You can obtain the EIN by applying online via the IRS website. EIN is required even if a corporate entity does not have additional employees.  

  1. Manage company’s finances.

Once you have obtained the EIN and have an official business name, set up a corporate bank account for business expenses. This establishes the necessary legitimacy and independence of the company. It also offers evidence of the separation between the business and the owners. An independent bank account shields the company from liability and protects the owner while making it easy for taxation and accounting.

  1. Secure permits and licenses

Obtain all the necessary permits and licenses that your business needs to operate legally.  Typical permits your business might require include specific business permits, professional licenses for each practitioner and sales tax ID numbers. You can find more information about these licenses and permits from your state’s Department of Corporation website.

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Scott Koegler

Scott Koegler is Executive Editor for PMG360. He is a technology writer and editor with 20+ years experience delivering high value content to readers and publishers. 

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